‘Perfect storm’ sees disputes spiral

‘Perfect storm’ sees disputes spiral

‘Perfect storm’ sees disputes spiral The Financial Ombudsman Service (FOS) has officially revealed its annual report, which makes poor reading for the general insurance industry.

FOS received a record 39,479 disputes, an increase of 16% from last year with the general insurance industry largely to blame.
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General insurance disputes accounted for 38% of the overall increase, due to a “perfect storm” of conditions, according to John Price, lead ombudsman - general insurance, at FOS. Price told Insurance Business that increases in the number of withdrawn or denied claims highlights a “changing approach” for the insurance industry.

“We also see that there has been an increase in outsourcing of claims handling, not only internally but overseas,” Price continued. “We think that taking that outside the core business is also contributing to a level of dissatisfaction among customers who don’t feel as if the people they are dealing with understand their disputes.”

Price noted that pressures on the industry’s bottom line are reverberating into higher dispute numbers, along with changes in operations by some of the biggest firms in the country.

“There is a reduction in resources available to the insurers with many changing their operating systems, changing their arrangements and organisational restructures and I think that again has put pressure on areas such as IDR and EDR which again leads to an increase in dissatisfaction,” Price said.

Currently, when a dispute is received by FOS it is then sent back to the financial services provider to try and resolve the matter and Price said that the industry needs to look to the banking sector as a guide to rectifying its dispute problem.

“Banks seem to be able to resolve a large number of matters in the time that is allowed before that matter steps into what we call acceptance,” Price continued. “The insurance industry isn’t quite at the same level. We would like to see a greater number of matters resolving within the first 21 or 45 days they have to resolve the dispute and we think that would be an excellent outcome for the industry.”

While brokers may have bucked the rising dispute trend, as Price revealed at the recent NIBA Convention, they play an important role in helping to stem the tide of disputes.

“The broker has a very important role there to make sure people do understand what their policy really does provide and doesn’t,” Price continued.

He suggested that while brokers do not need to explain every small detail to clients, certain issues must be highlighted.

“I think if they do, that will lead to a decrease in the number of disputes that you see,” he concluded.

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