In September the Financial Ombudsman Service (FOS) published company specific complaints data for the first time while the ABI has published company aggregated data.
The FOS's intention is to drive improvements to complaints handling in the most direct way possible - by revealing individual company performance. The arguments for are the same as for publication of critical illness (CI) and income protection (IP) declined claims statistics. The results, for CI, have been to drive down rates substantially, although this could not have been achieved without the supporting work by the ABI on its code of practice.
Opponents of the FOS initiative point out that the data is aggregated across insurance sectors and that this prevents proper comparisons, for example long term protection products are lumped in with general insurance. The point is valid and I hope that future FOS publications can be more product specific. Nevertheless, the ABI and FOS figures are highly revealing.
First, they show the true enormity of the PPI scandal. On numbers of complaints referred to the FOS, PPI received over five times more complaints than other insurance product (31,066). The next worst was car insurance - which has double the number of policies in force. But then we move to the percentage of complaints which the FOS decided in the claimant's favour. Here the industry average is 89% but it gets worse.
If you look at the banks and assume that the vast majority of their GI complaints are about PPI the figures for say MBNA, Barclays, Lloyds, Northern Rock and Capital One are a massive 98/99%. Ah, but maybe is it just a fault of the product and sales processes that is all going to be sorted out by the new FSA rules? But looking down the list of companies one finds the specialist provider Pinnacle with a rate of 26% which is a good figure for any product range.
So what we actually have here was a decision to make no effort at all to resolve consumer complaints before they reached the FOS even though it was known that the companies concerned did not have a leg to stand on. A challenge for the new emerging protection market will be to ensure that cases only go to the FOS when companies have real grounds for believing they are right - and this in turn should reduce the numbers significantly. A good target would be the one in four achieved by Pinnacle.
So what are the figures for CI, IP, and PMI? First, for the numbers of FOS complaints, there were 3.9/10,000 policies for IP, 2.0 for CI, and 0.9 for PMI - this compares with 20.7 for PPI. It is not possible to disaggregate the figures for upheld consumer complaints but there are some clues where companies specify divisions based on product lines or where they largely cover only part of a product sector. AXA PPP Health Care was 44%, Unum was 43%, Aviva Health was 36% and BUPA was 25%.
The FOS will be publishing figures twice a year and I hope they are able to refine them into clearer product categories. The end result will concentrate minds and should avoid a situation where some companies feel they "can get away with" 99% of cases going against them.
Richard Walsh is managing director of SPPR Consulting
