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BANKS HIT BY MASS REVOLT

More and more consumers are complaining about insurance

Wednesday May 28,2008

By Esther Shaw

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THE number of people taking mortgage and banking disputes to the official watchdog tripled last year.

The number of complaints about insurance doubled.

The Financial Ombudsman Service (FOS), which mediates between consumers and financial companies, handled a record 794,648 consumer enquiries and 123,089 new complaints in the 2007-08 financial year — a 30 per cent annual increase.

The FOS said the High Court test case involving the Office of Fair Trading (OFT) and eight current account providers — and the resulting consumer backlash over fees — prompted a tenfold increase in complaints about charges on current accounts, which contributed to an overall tripling of banking complaints.

The review found consumer discontent with controversial payment protection insurance (PPI) about which complaints had increased six times — with most relating to how policies were sold. The insurance is being investigated by both the Competition Commission and City watchdog.

“This time last year we had hoped we were starting to see a downward trend in complaint numbers for the first time,” said Sir Christopher Kelly, chairman of the FOS.

“The sudden surges in banking and insurance disputes this year have meant that predicting, managing and dealing with complaint volumes has been more of a challenge for us than ever before.”

Complaints about motor and household insurance were on the up, although the FOS reported a slowdown in the number of disputes about health and travel insurance — as well as some investment products.

Plus, while mortgage endowments were the most complained about product last year — accounting for nearly half of all disputes, the number of complaints fell 70 per cent this year.

The review showed that while half of the total number of disputes related to six of the UK’s largest financial services groups — broadly reflecting the amount of business they carry out — more than 95 per cent of businesses covered by the FOS had no complaint referred to the service during the year.

The review also found that the number of complaints referred to the FOS from consumers aged under 35 doubled during the year, while overall, the service settled 99,699 disputes.

David Kuo, head of personal finance at money website Fool.co.uk, said the escalation in complaints to the FOS “reflects the mushrooming of complicated financial products that consumers are expected to understand”.

“But it is good to see that consumers are become more confident about complaining.”