Penalties for Insurers behaving badly

foggytown

It has been mooted before in this forum that the FSA/FOS should have the ability to penalise insurers who demonstrably ill-treat their customers. A financial punitive reprimand could act as an effective punishment and deterrent.

The response of some in here has been to the effect that, every time a complaint is made to the FOS, it costs the insurer £500. I haven't found this officially expressed anywhere. Does that mean the insurer is charged £500 by the FOS for each complaint? Or is it someone's estimated opinion that the extra admin costs to an insurer complained against amount to about £500. If there's an official source for this "fact" I'd like to see it.

vaio

I think the FOS is funded (in part at least) by imposing a fee on complained about companies.

I thought it was £700 but £500 sounds familiar too.

I’ve previously argued that there should be a significant downside for sustained or systematic mistakes/unfairness. 100% increase on awarded sums with a minimum of £5k sounds reasonable if it gets as far as the FOS.

I.e. If they make the mistake, fail to resolve it at first instance and then fail to resolve it within their formal complains procedure.

Max_Planck

Standard case fee is £500 http://www.financial-ombudsman.org.uk/publications/technical_notes/QG1.pdf

MrRedundant

Its quite ridicolous that any company can be charged simply because someone complains and follows it through no matter how fair the complaint is! The charges should not be incurred when cases are not upheld. Should also be limited room for a complainant to incur a cost where complaint is found to be malicous or completely unreasonable.

mikey72

MrRedundant wrote: »

Its quite ridicolous that any company can be charged simply because someone complains and follows it through no matter how fair the complaint is! The charges should not be incurred when cases are not upheld. Should also be limited room for a complainant to incur a cost where complaint is found to be malicous or completely unreasonable.

With good customer service the insurer could avoid it. With a penalty they would probably try even harder.

Simulacraton

mikey72 wrote: »

With good customer service the insurer could avoid it. With a penalty they would probably try even harder.

Don't you think that just leaves the FOS complaints system open to abuse from consumers?

Seems a bit unfair to me. If I had to pay a court £500 just to make a not guilty plea for example, I'd be very upset to say the least!

MrRedundant

mikey72 wrote: »

With good customer service the insurer could avoid it. With a penalty they would probably try even harder.

Anyone who has worked in customer service will confirm that many customers are idiots who make vindictive and malicous complaints in an aggressive and threatening manner because they made a mistake.

foggytown

MrRedundant wrote: »

Its quite ridicolous that any company can be charged simply because someone complains and follows it through no matter how fair the complaint is! The charges should not be incurred when cases are not upheld. Should also be limited room for a complainant to incur a cost where complaint is found to be malicous or completely unreasonable.

Thank you for apparently not understanding my original post. The suggestion is that insurers should be fined if complaints are upheld and found to be the result of unreasonable actions on the part of the insurer.

Quentin

Insurers do get penalised even if complaints are dismissed!

Not only have they had to pay the £500, they have had to devote management time to dealing with the issue at their own expense.

But rather like fining councils/hospitals etc when they do things wrong, who really pays for this in the end??

mikey72

MrRedundant wrote: »

Anyone who has worked in customer service will confirm that many customers are idiots who make vindictive and malicous complaints in an aggressive and threatening manner because they made a mistake.

Don't make a mistake, then call the customer an idiot for you not fixing it then.

raskazz

If a customer brings an entirely frivolous and baseless complaint (and I have seen many in my time) then they should get charged some sort of penalty.

Likewise, where complaints are not upheld the firm should not be charged.

Imagine a situation where Firm A has 100 customers and has 3 complaints upheld out of 10 submitted. Firm B has 50 customers and has 5 complaints upheld out of 10 submitted.

In that scenario both firms will be penalised to the tune of £5000 despite:

1) Firm A having a lesser rate of complaints submitted per customer (10%) than Firm B (20%)

2) Firm A having a lesser rate of upheld complaints per customer (3%) than Firm B (10%).

3) Firm A having a lesser absolute number of upheld complaints (3) than Firm B (5).

That is grossly unfair.