How a firm handles complaints from its clients can say a lot about its culture, not least its approach to its customers. With this in mind, the FCA recently published a thematic review of “Complaint handling” across the financial services sector (the “Thematic Review”) and a follow-up consultation paper on “Improving complaints handling” (the “Consultation Paper”), setting out its improvement proposals.

In this article, we assess the key findings of the Thematic Review and analyse the potential impact for insurers of the proposals set out in the FCA’s Consultation Paper to improve complaints handling.

Current regulatory requirements

The aim of the Thematic Review, which included three general insurers and three life insurers, was to assess how well complaints were handled across the financial services sector and whether changes were required to the current regulatory regime.

Under the current regulatory framework, customers:

  • Can expect routine complaints to be answered within 24 hours, and more involved complaints within eight weeks
  • May refer their complaints to the Financial Services Ombudsman (the “FOS”) if they are not satisfied their complaint has been appropriately resolved within eight weeks
  • Are provided with a formal “final response letter” to complaints resolved within the eight week deadline setting out the resolution to the complaint and any redress

Key findings

A key theme emerging from the Thematic Review was how firms communicate with their customers. The FCA suggested that firms should be allowed greater flexibility in how they use modern technology to make it easier for customers to complain to firms. Some firms received criticism for final response letters which were found to be too legalistic and/or were not tailored suitably to the customer’s complaint.

The FCA also found that:

  • Some firms were not appropriately escalating complaints to dedicated complaints handling teams
  • More complaints should be resolved informally
  • Front line staff should be empowered to take ownership of and resolve complaints, especially minor complaints, where the customer typically simply expected an apology or a small amount of redress

The Thematic Review also found that the majority of customers were unaware of their rights to refer their complaints to FOS. The FCA therefore identified a concern that customers may be forced to accept redress, or a resolution, which is not appropriate, or in their best interests, simply because they may not know how to challenge a firm’s decision.

Room for improvement

In the Consultation Paper, the FCA proposed the introduction of the following measures to improve complaints handling at regulated firms:

  • A ban on the use of premium rate numbers, i.e. no more than “basic rate”
  • An extension to the time period to deal with complaints less formally from the next business day following  receipt of the complaint to the end of three business days
  • A requirement that firms send a written communication to all complainants (including complaints resolved within the new deadline of three business days)  referring to the complaint; summarising the resolution; and informing the customer of their right to refer the complaint to FOS if they remain unsatisfied
  • Allowing customers to refer their complaint to FOS without having to wait for the current eight week deadline to lapse
  • Ensuring firms report and publish all complaints (not just those which remain unresolved the following business day). The FCA will improve the Complaints Return to capture more information about all complaints, including details of any “goodwill” payments

The FCA’s proposed ban on premium rate telephone  lines should be fairly easy for insurers to implement. The industry has already been moving towards the use of “basic rate” numbers for some time. Insurers are also expected to welcome the opportunity to resolve complaints less formally, which should help complaints to be resolved more quickly and efficiently.

However, some of the proposals may be less welcome. The FCA has observed that some overly legalistic and formal “final response letters” could benefit from a change in style and content to make them more customer-friendly. The FCA also proposes that firms send a written communication to all complainants. Firms do not currently have to send a formal communication where complaints are resolved within 24 hours. It will be a challenge for insurers to communicate with the customer more frequently while ensuring that their communications are appropriately tailored to the customer. The good news is that the FCA has indicated that they will take a more flexible approach to the methods which firms use to communicate with customers going forwards. For instance, firms should be allowed to use SMS and email where appropriate.

If the FCA follows through on its complaint reporting and publishing proposals, this could also add to the administrative burden for firms and may prove difficult for insurers to implement across distribution chains.


Most of the FCA’s proposals should be relatively uncontroversial and should not give insurers cause to grumble. The FCA is not seeking to introduce its proposals until March 2016 and has asked for comments from regulated firms by 13 March 2015, providing insurers with an opportunity to raise any concerns. For now, insurers have a vital window to review, and make any improvements to, their complaints handling policies and procedures well before the FCA’s proposals become permanently part of its rulebook.