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overview of the current financial year so far (2010/2011)

in this chapter:

  • We look at how we are dealing with the current demands on our service - and the operational and financial implications nine months into the current financial year (2010/2011).
  • We provide stakeholders with details of the trends we are seeing so far - and how we anticipate these trends are likely to continue into 2011/2012.

overall case volumes so far in 2010/2011

We are a "demand led" organisation - so forecasting the volumes of complaints likely to be referred to us is a critical part of our planning. However, the extent to which financial businesses and consumers cooperate with us in our work resolving cases also has a significant impact on our workload.

In the consultation on our plans and budget at the start of 2010, stakeholders expressed varying views on the number of cases they believed would be referred to us about specific financial products. There was particular uncertainty about the likely number of new PPI cases. The broad consensus favoured a central assumption of an overall rise of 17% in new cases - but with the possibility of significant fluctuations in PPI cases, depending on the outcome of proposed action by the FSA.

So far this year, new cases have increased. We now expect the number of cases for the year to March 2011 to be 7% higher than last year. However, within this total figure, PPI cases have risen by almost 40%, while other cases have fallen by 7%. There is more detail about these numbers at annex A.

In October 2010 the British Bankers Association (BBA) issued judicial review proceedings - principally against the FSA in relation to its PPI complaints-handling guidance, but also involving the ombudsman service in relation to information on our website. Some businesses with large numbers of PPI complaints have decided that they will not respond substantively until the final legal outcome of these proceedings is known.

We expect an increase in the number of PPI cases being referred to us as a result - with some financial businesses being less cooperative in progressing those cases.

The current rate at which we are resolving cases is equivalent to 180,000 cases in a full year - compared with our budgeted forecast of 210,000 for the year. This reflects:

  • a larger proportion of harder-fought cases (with significantly more disputes now being referred to an ombudsman for a final decision);
  • an increase in the complexity of cases; and
  • fewer cases capable of being resolved quickly by informal settlements (with some businesses now improving their own complaints handling in relation to certain types of cases - and resolving more cases satisfactorily themselves).

"case mix" trends so far in 2010/2011

During the year the types of issues and products involved in the cases we see (the "case mix") have continued to change - and in many instances have become more complex.

complaints involving banking, credit and mortgages

Aside from our rapidly-growing PPI caseload, complaints involving banking and credit (including mortgage-related complaints) continue as our largest area of work. This is unsurprising, given the size of the market. Our publication of complaints data relating to individual financial businesses - together with regulatory action by the FSA - appears to have resulted in some improvement in the way businesses are handling these types of cases.

Reflecting the current uncertain economic times, we are seeing an increase in the number of cases where consumers are experiencing financial pressures - and expect additional help and flexibility from their lender. Meanwhile, lenders are increasingly focused on reducing their overall costs. This means there is less common ground for negotiating informal settlements - so resolving these cases is becoming more difficult.

We are seeing a rise in the number of complaints about the quality of goods obtained on credit, with cases in this area also being harder-fought and noticeably less easy to resolve informally than in previous years. A higher number of cases are being referred to our ombudsmen for final decisions - and more complex analysis is required to try and resolve these cases.

complaints involving motor and general insurance

The number of cases we are seeing involving motor and general insurance is broadly similar to previous years. Many of the issues in these cases are also the same as in previous years - with no new major trends. For example, we are still dealing with significant numbers of complaints about repairs - in terms both of the quality of repairs and the liability of contractors.

Disappointingly, we are still seeing insurers who fail to understand that, if they choose to repair vehicles, they are responsible for the quality of those repairs - and for the consequences of poor-quality work. This is despite information we have published on our website about our well-established approach to these types of complaints.

complaints involving investments

The number of cases relating to investments continues to decline - compared both with the numbers for last year and with this year's forecast. Market conditions are not as subdued as anticipated. And encouragingly, we are seeing evidence of improved complaints handling on the part of some businesses - which is also resulting in fewer complaints being referred to us.

Several specific "new" issues have emerged over the last few years in our investment casework. For example, we have received complaints from a number of consumers who had assumed that property was a "safe" investment - and were unhappy to find they could not access capital when withdrawals from property funds were deferred. We have set out our general approach to this type of complaint in the online technical resource on our website.

We have also seen a significant number of investment-related complaints involving consumers who found they had invested in products which carried greater levels of risk than they had anticipated. Consumers have complained that this happened where the underlying investments did not seem to match the descriptions they were given. We have seen some instances of highly unsuitable products being sold to elderly and inexperienced investors. We are talking individually with businesses - and, where appropriate, with the regulator - where this appears to have happened.

We continue to receive a small but steady stream of complaints involving pensions and portfolio management. Many of these cases also relate to the degree of risk involved - where this year's market volatility has given rise to unexpected losses. Disagreements between consumers and businesses about what investments should make up a "high", "balanced", "low" or "no risk" portfolio form a significant part of our casework.

resolving cases in 2010/2011

Over the year we have worked hard to reduce the length of time that consumers and businesses need to wait to have their cases resolved. As the table below shows, we have made good progress in all cases other than PPI. However, we believe there is still substantial room for improvement - and we are working hard to do better.

our timeliness (excluding PPI cases) resolved within
3 months
resolved within
6 months
resolved within
9 months
resolved within
12 months

2009/2010

36%

62%

74%

81%

so far in 2010/2011

49%

76%

85%

89%

In relation to our PPI workload, the challenging environment we have described earlier is affecting our ability to resolve cases as quickly as we would like. However, we have increased our resources significantly during the year, to help us tackle the rising volumes of PPI cases.

We are also working hard to improve how long it takes us to deal with cases that are referred to the final stage of our process, as consumers and businesses are currently waiting longer than we would like for final decisions by our ombudsmen. This is because of the significant increase in the number of requests - both by businesses and consumers - for an ombudsman's final decision. The proportion of cases requiring an ombudsman's decision has risen from around 8% in 2008/09 to a current rate above 14%.

This reflects the more entrenched attitudes we are increasingly seeing across all areas of our casework - probably resulting from the tougher economic climate affecting businesses and consumers alike. As well as having implications for our levels of customer service, the increase in requests for a final decision by an ombudsman has significant cost ramifications.

our financial performance in 2010/2011

Our income is closely linked to the number of cases we resolve. This is because 80% of our funding is raised through case fees on a cost-per-case basis. Our income so far this year has been lower than anticipated, as a result of our resolving fewer cases than forecast. This reflects the more complex and harder-fought cases we are now dealing with, and the less cooperative stance being taken by some financial businesses in progressing PPI cases.

In response to the increasing complexity of cases - leading to a higher proportion of disputes now being referred to our ombudsmen for a final decision - we have significantly expanded our ombudsman team. This will cost us around £2 million over the whole year.

The higher than expected volumes of PPI cases have also required us to increase our resources rapidly. Adjudicators and ombudsmen who have transferred to work in this area need to be appropriately trained. Transferring staff from one area of our work to another takes time - and has cost implications. This is why we have needed to use contractors to help us scale-up quickly to deal with the additional PPI workload.

The past few years have proved the importance of having a flexible workforce model involving contractors. But inevitably, this increased flexibility means increased cost. We are now reviewing the balance between our contractors and our permanent staff. We started recruiting permanent staff to handle additional PPI cases in July 2010. However, the costs incurred over the first part of this financial year - predominantly to deal with the increased PPI volumes - mean that we now forecast to end the year with an overall deficit of around £8 million. We can cover this by using our reserves.

Over the year we have launched a range of efficiency and cost-reduction drives. We have re-negotiated all our major contracts (releasing more than £2 million for the year as a whole). So we are now able to absorb most of the additional case-handling costs we are currently facing. In the absence of any significant cost implications arising out of the British Bankers Association's legal challenge to our handling of PPI cases, we expect to end the 2010/2011 financial year with a broadly balanced month-on-month budget.

our staff

We rely on the skills, expertise and professionalism of our staff to decide cases in a way which gets to the right outcome for all parties. In response to the continued high level of demand and the increase in our caseload, we recruited and trained a significant number of new adjudicators in 2009/2010. We have recruited further adjudicators this year to handle the latest rise in PPI cases (see above). We continue to invest heavily in the development of these new adjudicators - and we are reviewing our professional-development model as part of this investment.

As explained above, we have also significantly increased the number of our ombudsmen - and we are giving careful thought to whether we need to increase this resource further. Ombudsmen are the ultimate decision-makers in individual cases - making final legally-binding decisions. This means that we have to maintain the most stringent standards in their recruitment and training.

other initiatives and achievements in 2010/2011

Highlights of our work this year to help us better meet the needs of those who use our service - and to share more about the work we do - include the following projects and initiatives.

offering alternative individually-tailored options for customers who might struggle with standard processes

  • We have established partnerships with eight charities - to help us better understand and respond to consumers who are less comfortable with "process and officialdom".
  • We held our second "customer service day" for all staff - working with a number of specialist charities to help us focus on getting a better understanding of the impact of mental illness.
  • We are working with Citizens Advice to trial a dedicated phone link between their bureaux and our front-line customer-contact centre.

expanding our online technical resource

  • We have doubled the content of the online technical resource on our website - to provide increased insight into our approach to complaints, ranging from caravan insurance to spread-betting.

making our lines of communication with stakeholders clearer and stronger - and promoting our impartial, authoritative credentials