On 26 May 2016, the Financial Ombudsman's Service published its annual report. As in prior years, the report contains statistics for the period between 1 April 2015 - 31 March 2016 as well as detailed commentary on trends and themes.  

Key Themes

  • Payment Protection Insurance still accounts for around half of all complaints received by FOS, although the volume of new complaints has dropped. 
  • The FCA has yet to reach a landing on its approach to complaints about the level of commission charges for PPI (and whether they are unfair under the Consumer Credit Act 1974), after the Supreme Court decision in Plevin v Paragon Finance [2014] UKSC 61. This is slowing resolution rates down at FOS.
  • Complaint volumes about banking products have increased significantly (by about a third), but complaints about insurance and investments are about the same as last year. The rate of complaints being upheld is broadly similar to last year.

Claims Management Companies (CMCs)

  • CMCs are the source of around 81.5% of all PPI complaints and 61.5% of all packaged bank account complaints. 
  • FOS is reporting examples of poor practice to the Claims Management Regulator (CMR) and speaking directly to the companies to discourage unmerited complaints.

Enquiries (customer concerns) vs New Complaints

  • Banking services (including packaged bank accounts, current accounts, loans, credit cards, mortgages) made up around 30.5% of enquiries and 31% of new complaints.
  • Insurance (excluding PPI) made up 16.5% of enquiries and 9% of complaints.
  • PPI made up 23% of enquiries and 56% of complaints.
  • Financial products made up 10% of enquiries and 4% of complaints.

New Complaints:

  • The total number of new complaints increased slightly by 3% (340,899 new complaints compared to 329,509 in 2015)
  • Within this figure:
    • Banking and credit complaints were up by 33% (106,327 compared to 79,763)
    • Investment and pensions complaints were broadly stable (14,576 compared to 14,723)
    • Insurance complaints (excluding PPI) were also broadly stable (31,284 compared to 30,080)
    • PPI complaints were down 8% (188,712 compared to 204,943).
  • Complaints about misselling and advice make up 99% of PPI complaints, 24% of insurance complaints, 53% of banking complaints, and 59% of investments and pensions.
  • The big year-on-year risers (as a %) for new complaints are:
    • Packaged bank accounts (up 107%)
    • Payday loans (up 178%)
    • Spread-betting (up 113%)

Small Businesses (Micro Enterprises):

  • In this demographic, FOS has highlighted complaints about current accounts (1,299 out of 4,777 complaints or 27%), interest-rate hedging products (328 complaints or 7%) and commercial property insurance (219 complaints or 5%). 
  • The majority of new complaints (69%) related to banking products, with insurance making up 18%, investments 9% and PPI 4%.

Outcomes

  • The proportion of complaints being upheld in the insurance sector is broadly similar to last year, with the average rate across all products (including PPI) up 0.2% from 2015.
  • For the investment and pensions sector, the uphold rate is down 1.6% compared to 2015.
  • For banking and credit complaints, the uphold rate is down 5.2%.

Sector Trends

  • Insurance – the biggest contributor to complaints (excluding PPI) was motor insurance with a share of 27.5%. The next biggest share was buildings insurance with 13%. Most other products were below 5%. Poor communication at both point of sale and during the claims process is a significant driver of complaints in this sector.
  • Banking and credit – the biggest contributor is packaged bank accounts (41%), with the next biggest share coming from consumer credit and current accounts (13% each). A key theme appears to be the way regulated businesses are dealing with financially-distressed or vulnerable customers, and whether they are being treated fairly and supportively.
  • Investments and Pensions – the biggest contributor to these complaints was pensions (personal pension plans, annuities, SSAS/SIPPs) with a total share of 27%. Pension complaints were up 5% generally. The next biggest contributors were mortgage endowments and whole of life policies and savings endowments, with a share of 13.5% each. Most complaints continue to be around misselling and suitability, although complaints relating to administration do feature. UCIS complaint volumes are broadly similar to 2015. Complaints relating to tax-mitigation investments (e.g. film partnerships) were down 44% compared to last year.

Who is being complained about?

72% of complaints were directed at banks and 10% at general insurers. Just 3.5% of complaints were directed at insurance brokers, 2% at mortgage intermediaries, and 1% at IFAs.

Conclusion

Taken as a whole, the flavour of the Annual Report suggests that the complaints environment for 2015/16 was very similar to the prior year. That said, the total volume of complaints is slightly up and the banking sector appears to be driving that. PPI remains a major driver of the volume even if the peak is behind us, and packaged bank accounts are a significant contributor to the new growth in complaint activity.  Beyond that, the message from FOS is that the insurance industry needs to continue improving its communications with customers, banking customers need more support where vulnerable or financially distressed; and the investments and pensions sector should continue to focus on making sure products are suitable and administered correctly.