Appraisal

The consumer's perspective

Where a disagreement arises between a consumer and a firm, it will frequently be possible to reach a settlement through negotiation. In cases where negotiation fails, the consumer has the choice of referring the matter to the FOS or pursuing a case through the courts. The FOS offers a number of key advantages:

  • Cost. The service offered by the FOS is free to the complainant at the point of use. With the courts, an unsuccessful claimant faces a risk of having to meet the costs of both parties.
  • Inquisitorial process. Once a case is accepted for investigation, the FOS will carry out its own investigations to establish where the truth lies. This is in contrast to the courts, which decide on the basis of the arguments presented by the insurer and the consumer.
  • Accessibility. The FOS has introduced a number of initiatives to make its service more accessible to complainants. For example, it provides publications in Braille, large print and on audiotape. In its 2005–06 annual review the FOS boasted of “handling correspondence in Arabic, phone calls in Tagalog and emails in Urdu”. The following year, the FOS website recorded 40m hits and in March 2007 the FOS posted a video welcome from the chief ombudsman, Walter Merricks, on its site. However, Lord Hunt was concerned that the FOS “looks too much like a middle-class service, for middle-class people”.
  • Informality. The processes operated by the FOS are informal and friendly. There is no need for a complainant to be represented, and in fact in most cases representation is discouraged. Nearly all complaints are decided on papers only – in contrast to the courts where a hearing is the norm.
  • Expertise. The FOS undoubtedly has more experience than the courts in dealing with the types of insurance dispute within its jurisdiction. Importantly, it may also be more aware of current issues within the industry. And it may have a better understanding of the problems faced by the consumer.
  • “Fair and reasonable” criterion. Perhaps most importantly, the FOS makes decisions on the basis of what is “fair and reasonable in all the circumstances”. This is vital in insurance cases, since there is widespread agreement that insurance law is weighted heavily in favour of the insurer.
  • Range of remedies. The FOS can provide remedies not available through the courts. For example, it may instruct a firm to reinstate a policy, or to rewrite it on different terms.
  • No loss of rights. If a complainant is not happy with the decision of an ombudsman, he or she may reject it and pursue the case against the insurer through the courts. However, if the complainant accepts the decision it is binding on the insurer up to £100,000.

The regulated firm's perspective

Regulated firms are, of course, obliged to accept the jurisdiction of the FOS. However, there are advantages to the firms in doing so. There are the issues of expertise and cost already mentioned in connection with complainants. Privacy may also be a factor: unlike the decisions of the courts, the decisions of the FOS are only published in anonymised form. Arguably, however, the greatest benefit to firms is one of reputation. Consumers feel more confident about buying insurance, knowing that there is a robust and independent complaints system in place should anything go wrong.