Complaints Handling – FCA Identifies Areas for Improvement

In their regulatory round-up for March 2019, the FCA has focused on general insurance complaints as one of their topics of interest.

Supervisory work by the regulator has highlighted that many firms are failing in their duty to deliver fair outcomes for customers when handling their complaints, despite the regulatory obligation to do so and regardless of complaints handling now representing one of the eight core knowledge requirements for insurance intermediaries under the Insurance Distribution Directive (IDD).

Clearly, there is interest from the FCA on how effectively firms are dealing with complaints.

The FCA’s definition of a complaint can be found in The Disputes Resolution Procedure (DISP) section of their handbook.  

A complaint, according to this definition, is:

“Any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service or a redress determination, which:

  1. alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience;
  2. relates to an activity of that respondent, or of any other respondent with whom that respondent has some connection in marketing or providing financial services or products, which comes under the jurisdiction of the Financial Ombudsman Service.”

Firms should have a formal, written complaints procedure. This will include, for example:

  • The definition of a complaint and how to recognise this
  • How to report a complaint to a senior person at the firm
  • Who is responsible at the firm for dealing with complaints (and their deputy)
  • The timescales for dealing with complaints
  • How a complaint will be categorised
  • How complaints are recorded
  • How they will be monitored and analysed by the firm

It’s important that this procedure is sufficiently detailed - and cascaded to all members of staff – to ensure that staff understand what a complaint might look like and what needs to be done if one is received. If all of the above is put in place and all employees at the firm are fully aware of what is involved, then the firm should be in a strong position to handle complaints effectively and in line with the FCA’s expectations.

Some of the areas that the regulator has highlighted for improvement include:

  • Ensuring that all elements of a complaint are addressed
  • The quality of response letters issued
  • Investigation of complaints (which must be undertaken diligently, competently and impartially)
  • Capturing the root causes of complaints
  • Ensuring effective oversight of complaints handling by a firm’s outsourcers

It is also worth bearing in mind that the FCA has announced an increase in the Financial Ombudsman Service’s award limit from April 1st 2019. This was covered in a recent Insight article.

For users of the Aviva Development Zone, our Course of the Month (April 2019) is ‘The Role of the Financial Ombudsman Service’ which is part of a mini-pathway on complaints handling. The pathway looks at the principles of customer service, explains how to handle complaints according to FCA rules and looks at the role of the Financial Ombudsman Service (FOS).

The FCA has stated that “as part of our ongoing supervisory work, we will continue to monitor firms’ compliance and take action with individual firms where necessary.”

Complaints handling should therefore be taken seriously by firms and procedures must be  implemented effectively, ensuring compliance with DISP requirements.

About the author

Bruce has worked in financial services for the whole of his professional life, including 11 years as a Compliance Director of a US owned Independent Financial Advisory and Wealth Management business. At RWA, Bruce leads the Audit and Conduct Risk department from our Manchester office. He is RWA's lead consultant to the Guernsey Financial Services Commission (GFSC).

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