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corporate plan and 2009/10 budget

January 2009

complaint trends 2008/09 and 2009/10

2008/09 enquiries

Enquiries to our customer contact division are expected to be 66% higher than budget. This reflects, amongst other things, the impact of large volumes of complaints about PPI and credit-card default charges.

enquiries actual
12 months
2007/08
actual
9 months
2008/09
forecast
12 months
2008/09
budget
12 months
2008/09
phone calls to our enquiry line 425,942 283,465 400,000 260,000
written enquiries 368,706 286,651 380,000 210,000
total 794,648 570,116 780,000 470,000

2008/09 new cases

We now expect to receive 120,000 new cases in 2008/09. This is 33% higher than the figure in the budget - which assumed a significant reduction in the number of new cases, mainly due to a fall in new mortgage-endowment cases and to new cases about unauthorised-overdraft charges being put on hold during the continuing High Court case.

However, as explained in earlier chapters, the anticipated reduction in these cases has been offset by significant increases in new cases relating to other products - including PPI and credit-card default charges.

new cases actual
2007/08
forecast
2008/09
budget
2008/09
banking      
credit cards 14,123 17,000 8,000
current accounts 39,263 13,000 8,000
mortgages 6,824 9,000 8,000
other 8,258 10,000 9,000
insurance      
payment protection (PPI) 10,652 25,000 11,000
car/motor 6,009 7,000 6,500
other 10,622 13,000 12,500
investment      
endowments linked to mortgages 13,778 6,000 10,000
pensions 5,297 6,000 4,000
other 7,414 11,000 10,000
consumer credit 849 3,000 3,000
total 123,089 120,000 90,000

2008/09 cases resolved

In line with the general expectation that we would receive fewer new cases in 2008/09, we began the year with a reduced capacity linked to a target of resolving 110,000 cases. But, in line with the higher-than-expected volume of new cases and the consequent increase in our workload, we have recruited more than 230 additional adjudicators (both permanent and some outsourced) - with another 70 likely to join us by the end of March 2009.

This increase has taken place in a managed way during the course of the year, but inevitably there is a time lag before newly-recruited adjudicators become fully trained and effective. In 2008/09 we now expect to resolve 115,000 cases. But in 2009/10, when the new additional adjudicators will become fully productive, we expect to resolve the record number of 165,000 cases.

2008/09 productivity and timeliness

The need to divert existing staff to training and mentoring our new adjudicators, and the delay in new adjudicators becoming fully effective, has had some impact on productivity. Nevertheless, we expect productivity to be very close to budget, with 4.6 cases resolved by each adjudicator each week.

The unexpected influx of new cases has increased the level of our work-in-progress significantly, which has inevitably had a marked effect on timeliness. Following the recruitment of additional adjudicators, we expect an improvement in timeliness during 2009/10.

workload plans actual
12 months
2007/08
actual
9 months
2008/09
forecast
12 months
2008/09
budget
12 months
2008/09
opening work-in-progress 33,974 57,364 57,364 58,536
new cases 123,089 93,526 120,000 90,000
cases resolved 99,699 80,799 115,000 110,000
closing work-in-progress 57,364 70,091 62,364 38,536
work in hand (weeks) 29.7 28.0 21.9 17.3
productivity 4.0 4.7 4.6 4.7
% closed within 6 months 70 61 60 80
unit cost £529 n/a £544 £542

2009/10 enquiries

Enquiries to our customer contact division during 2009/10 are expected to grow in line with our estimate of new cases.

enquiries actual
2007/08
forecast
2008/09
budget
2009/10
phone calls to our enquiry line 425,942 400,000 500,000
written enquiries 368,706 380,000 475,000
total 794,648 780,000 975,000

2009/10 new cases

The total number of new complaints is expected to increase to 150,000, 25% above the forecast for 2008/09. As in previous years, forecasting the numbers of our incoming complaints is not an exact science. But, from our initial consultation with industry bodies, there seems wide agreement that the numbers will materially exceed this year's forecast.

new cases actual
2007/08
forecast
2008/09
budget
2009/10
banking      
credit cards 14,123 17,000 16,000
current accounts 39,263 13,000 18,000
mortgages 6,824 9,000 16,000
other 8,258 10,000 15,000
insurance      
payment protection (PPI) 10,652 25,000 22,000
car/motor 6,009 7,000 11,000
other 10,622 13,000 17,000
investment      
endowments linked to mortgages 13,778 6,000 6,000
pensions 5,297 6,000 8,000
other 7,414 11,000 16,000
consumer credit 849 3,000 5,000
total 123,089 120,000 150,000

credit cards

We have assumed a modest reduction in case volumes, based on the expectation that default-charges disputes will reduce whilst disputed-interest, disputed-transaction, administration-related and fraud-related cases will increase, in line with pressures in the banking sector.

current accounts

We have assumed significant increases in cases alleging poor account administration or inadequate customer service, particularly relating to institutions under financial pressure or suffering merger disruption. The figure will be materially higher if a significant number of new cases about unauthorised-overdraft charges come to the ombudsman service.

mortgages

These cases are expected to increase in line with tighter lending policies and a higher level of repossessions. Some issues relating to sales and contract terms will emerge as customers reach the end of existing deals and find renewal terms unattractive. And there is the potential for a significant volume of disputes around mortgage late-payment charges and other similar charges.

other banking issues

These are likely to include a variety of loan, overdraft and administration issues, including those relating to small businesses. Many banking issues are likely to arise from the increasing financial pressures on banks and their customers.

payment protection

Our forecast assumes a modest reduction in PPI case volumes. It is possible that the reduction may be greater if financial businesses improve their complaints-handling in relation to large areas of justified complaint. But - with several million PPI policies having been sold in recent years, and given the findings of regulatory investigations - there remains a significant risk that the numbers will exceed the forecast.

motor and other insurance

We have assumed across-the-board increases, as a result of financial pressures on insurers and customers and the impact of mergers. We have set up a joint exercise with the Association of British Insurers (ABI) to investigate what may be causing the current increase in these cases. But we have to make the assumption that the current upward trend will continue.

mortgage-endowments

We expect new cases to continue at around present levels, despite some upward pressure as increasing numbers of consumers receive 're-projection' letters showing likely shortfalls and as more policies reach the end of their term.

investment

Past experience suggests that poor stock market performance can be expected to result in increased complaints. These may arise, for example, where a financial business applies a market-value reduction to a with-profits fund, or where a fall in value exposes a mis-sale that was previously overlooked.

pensions

Stock market impacts, mentioned above, are likely to be mitigated by a decline in cases about opting out of SERPs (the State Earnings Related Pension scheme) which were at a high level during 2008 as a result of specific campaigns by some claims-management companies.

consumer credit

We assume a significant increase as credit-related pressures grow - for example, in relation to debt collection.

2009/10 cases resolved

The present high level of new cases has created a situation where some consumers and businesses have to wait longer than we would like before their cases can be resolved. To address this, and to deal with the expected level of new cases in 2009/10, we will increase the number of our adjudicators to nearly 700.

This should enable us to resolve 165,000 cases in 2009/10 - a significant increase over the current year. In addition to maintaining our productivity levels, this should reduce our work-in-progress to an average of less than 15 weeks by the end of 2009/10.

We have also modelled two other scenarios, with the number of new cases either 25,000 above or below our central assumption.

More new cases: our experience from previous years illustrates the need to plan for the contingency of significantly higher volumes of work. However, our budget already reflects significant increases in new complaints over present levels in all areas except PPI, credit-card default charges and mortgage-endowments. The ability to increase capacity to resolve more than 165,000 cases is uncertain - because of limits on the number of cases suitable for outsourcers, and the challenge of integrating even more new staff. So this scenario assumes that the additional cases would result in work-in-progress at an average of 23 weeks, with a consequential effect on timeliness.

Fewer new cases: the flexibility of our partially-outsourced model would enable us to reduce the number of adjudicators, comparatively easily, by about 40. That would leave us with the capacity to resolve 125,000 cases, reducing our work-in-progress to an average of 13 weeks. Lower volumes may adversely impact on the level of productivity.

2009/10 productivity and timeliness

Our budget assumes that overall productivity will remain around the present level. Where there are large numbers of cases relating to similar issues, there may be opportunities for increased efficiencies by using bulk-handling initiatives. But we need to set against this the effect of working practices in financial businesses, where disruption arising from mergers or service cutbacks may impact on our ability to handle cases efficiently.

As mentioned above, the increase in the number of adjudicators we have available should enable us to achieve a material improvement in our timeliness in resolving cases.

workload plans actual
2007/08
forecast
2008/09
budget
2009/10
opening work-in-progress 33,974 57,364 62,364
new complaints 123,089 120,000 150,000
cases resolved 99,699 115,000 165,000
closing work-in-progress 57,364 62,364 47,364
work in hand (weeks) 29.7 21.9 14.9
productivity 4.0 4.6 4.7
% closed within 3 months 42 35 45
% closed within 6 months 70 60 65
% closed within 9 months 81 80 85
% closed within 12 months 86 90 90

note
For clarity, we have excluded from these figures the 15,000 cases we have 'on hold' about unauthorised-overdraft charges. These cases continue to await the outcome of the test case in the High Court.