Financial Services Ombudsman’s Bureau Proposal to publish information on complaints records of insurers

 

IIF Response

Introduction

The following is the initial response of the IIF to proposals by the FSOB to make public certain details of findings in dealing with complaints. The proposals by the FSOB represent a radical step into the consumer/media sphere. We believe that, if not managed correctly, there is the potential for generating misunderstanding in the market, subverting the statutory/supervisory role of the Central Bank through periodic trial by media, denying insurers the right to due process under existing legislation and regulations and thus, denying customers the right to transact in an orderly and transparent market.

1. For each provider, information will be provided as to: total number of complaints, complaints upheld, complaints upheld in part, total amount of compensation awarded
   This proposal by the FSOB is a radical extension of its role, in assuming responsibility to inform the public about details of its work and findings. We believe that neither the proposal to publish details of market share nor the suggestion of a de minimis threshold addresses the potential for misunderstanding by the public.
   The publication of a high level of detail concerning individual insurers is likely to mislead the public and customers as to the overall quality of their complaints handling process. This is for the following reasons:
   1. The inevitable greater frequency of complaints against insurers with a large market share in FSOB reports could mislead the public into thinking that these insurers are less fair in their dealings with customers.
      
   2. Certain product types are more likely to attract complaints and this may give a false impression of the care and attention insurers are taking to serve their customers. In non-life insurance, for example, complaints can arise from claims or underwriting decisions such as cancellation of policies or  premium charged. The publication of an absolute number of complaints without reference to the volumes and types of transactions would be misleading.
      
   3. Similarly the publication of total number of complaints regardless of their merit or the FSOB’s ultimate findings is apt to be misleading.
      
   4. The current number of complaints against individual insurers is very low (fewer than 620 across the entire market in 2010). Hence reporting on absolute numbers of complaints against individual insurers is apt to be volatile and if taken up in isolation by the media likely to be misleading.
      
   5. Many companies have robust complaints handling processes involving senior personnel.  In such companies any cases upheld by the Ombudsman tend to centre on relatively subtle and subjective differences of interpretation of policy wordings or the weight to be attached to technical advice from one source over an alternative (e.g. where engineering advice on a cause of loss to an insured materially differs to engineering advice provided to the insurer), rather than clear and blatant unfairness to the consumer.

The current proposal risks drawing attention to absolute figures the significance of which is likely to be misunderstood and, worse, misreported.

We believe that the FSOB proposals could, if they are not implemented appropriately, concentrate headline reporting of complaints towards the major insurers in a way that generates publicity but does not serve the public interest.

In conclusion, the IIF does not oppose reporting of findings by the FSOB. But the format of reporting should be consciously and positively designed to add true transparency for the FSOB and the market. One approach could be for FSOB to publish, under the headings of company and product type, complaint information in the form of a ratio – e.g. number of complaints upheld per €1m annual premium income or per 1,000 policies.  Also, the numbers of complaints reported as ‘upheld’ or ‘partly upheld’ should be provided as percentages of total numbers of complaints handled.

In addition to our observations above we would like to discuss the following:

Is it the intention of the FSOB to continue publishing details under the three general categories: Investment, Banking and Insurance but add a fourth category of financial services provider and then break these down by product type?

Does ‘complaints upheld’ mean that there was a full award? Complaints ‘upheld in part’ would require a de minimis threshold. We would like to discuss this.

How does the FSOB count complaints? For example – a complaint from one complainant concerning or touching on five different policies may have one reference number – is this five complaints or one complaint? If there is an award and it affects one policy only is this a part Award and, if so, how will a de minimis threshold apply?

2.   In addition, it is deemed useful to have a de minimis provision for reporting of the claims record to ensure that information given has a meaningful statistical basis

Such a provision should not prejudice larger insurers. Smaller insurers may remain below the threshold in some years yet could statistically have a larger number of complaints upheld. See our comments under 1. above.

It would be helpful if the FSO could provide his most recent report in the proposed format (anonymised).

De minimis levels in other jurisdictions

The de minimis threshold in larger markets tends to be relatively high. It seems that Ireland would be unusual in that a relatively small number of complaints would be required. We would like to discuss possible anomalies that this could give rise to.

3.   To give an accurate picture of the complaints record of each provider, information about the relative market share of the provider will also be given

We assume that the FSOB is proposing market share by product type. For example Pensions can be broken up into Groups/Single – Personal/Executive – PRSA/AVC/ARF/AMRF products.

Where will this information be obtained from? We understand that this has been problematic in other jurisdictions as official statistics may not match the relevant timelines e.g., the most recent public data in Ireland in this regard are for the year 2009 via the Central Bank of Ireland website. The corresponding reporting period will be 1 year later for the FSOB.

Market share may vary considerably by product and consideration will need to be given to what categories will be used by FSOB. We would like to discuss how market share should be determined.

4.   Finally, it is proposed that in the Annual Report, case summaries may be provided which identify the financial service provider – in circumstances where there is a compelling public interest to do so. At all times and in all circumstances, the identity of the complainant/s will remain confidential

We are concerned that this ‘name and shame’ approach could in some cases be punitive to the insurer in a way that goes beyond any failure on its part in handling the complaint prior to the FSOB’s involvement. The FSOB already has the power to report the insurer to the Central Bank, which can then launch an investigation under the Administrative Sanctions Regime. The Central Bank can then decide to name the insurer.  Has the FSOB considered that, by publicising case details, it may be effectively abandoning a statutory path which affords due process to the insurer and the implicit understanding that naming the insurer is an option open the Central Bank?

The Irish market is relatively small and reporting of FSO cases would have a greater impact in Ireland than the UK and accordingly the decision to change the present reporting model has to be given very careful consideration.

In addition FSOB should bear in mind what other Ombudsmen do and not be out of line with other jurisdictions, in order to maintain the competitive position of Ireland.

We would like to discuss with the FSOB what criteria would be used to decide what case studies to publish?

 

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