FOS accused of targeting brokers

FOS accused of targeting brokers

FOS accused of targeting brokers

Brokers have alleged that the Financial Ombudsman Service is “coercing” their clients into making complaints against them, forcing intermediaries to pay thousands of dollars in dispute fees.

Readers told Insurance Business that in some cases they have to pay as much as $9,350 by the end of the external dispute resolution process (EDR) – whether or not they have been vindicated.

Insurance Business has seen copies of FOS bills brokers have received. In one case, a broker was hauled into a dispute process by FOS and handed a bill of $3,850 even though the outcome of the complaint was in their favour.

 “FOS is touting for business,” the broker said. “When our client was unhappy with his insurer’s decision on a claim, we supported him all the way. When it went to FOS and we were told that FOS made our client make a complaint against us even though they didn’t have one.

“Whether you win, lose or draw you have to pay. Our professional indemnity can cover the bill but a broker is getting slapped with one of these once a month, at a cost of a thousands of dollars, what will it do to their businesses?”

The source also raised concerns that some brokers will be reluctant to direct clients to FOS, worried they will fall victim to the costly complaints.

He stressed he supported the FOS dispute resolution process but called for fairness.

“It tries to portray fairness but there is nothing fair about that system. You are assumed guilty.

“The client can appeal, we can’t. The client complains but we can’t cross-examine them. We have to pay costs, the client doesn’t.  You don’t want to be dragged through the courts if you go against FOS and you don’t want to take such a big engine to court either – it’s not great for your reputation.”

However, FOS rejected claims that it encourages complaints against brokers. “We don’t proactively encourage consumers to lodge disputes but when a dispute is brought to us. One of our responsibilities is to identify the correct party to respond to the dispute,” a spokeswoman told Insurance Business.

She added that FOS was following ASIC’s rules. “Australian financial services licensees, including insurance brokers and insurance companies, are all required to hold membership with ASIC approved external dispute resolution scheme, like FOS,” it explained.

ASIC’s regulatory guidelines for the provision of EDR services prevent EDR schemes from charging consumers. FOS provides professional services to its member FSPs and they are required to pay fees for these services.”

It also pointed out that few cases brought to FOS are against brokers. In 2011/12, the organisation accepted a total of 25,298 disputes. Only 123 were against brokers and only 20% of those went all the way through to a decision. Of those decisions, 41% were found in favour of the consumer and 59% in favour of the broker.

“Disputes against insurance brokers only make up a very small proportion of the disputes FOS deals with.”

Has your brokerage been affected by an FOS EDR? Contact Insurance Business.

4 Comments
  • Paul 23/07/2013 10:48:16 AM
    I have found FOS to act with the utmost fairness. A client at my former business was egged on to make a complaint by another broker network. I saw the internal emails from the other broker organisation. The complaint was up held but we were never billed as the assessor at FOS agreed the client and the other broker had behaved badly. The complaint was in relation to a bill for broker services. I had provided renewal and the client took my terms to another broker after renewal. I billed the client for lost brokerage. The FOS assessor advised us to change our terms of trade.
    Post a reply
  • John duggan - AIS insurance 23/07/2013 10:51:19 AM
    We have had a couple of dealings with FOS & in both cases been screwed.Latest we paid $1100 for the privilege of their services & they awarded the client half of wht they were claiming $ 350. FOS agent honest & advised did not believe we were wrong , however stated, " paying the client is the way we roll".
    Won't change until we have an alternate / they have a competitor - John AIS Insurance

    Post a reply
  • Rick 23/07/2013 1:43:08 PM
    I am a little bewildered that in this day & age people don't accept the umpires rulings. I have a better idea - lets just use lawyers, that will cost us nothing...
    Post a reply