The Treasury Select Committee in March 2004 looked at endowment companies and the complaint process.

Timescales for handling endowment complaints

The industry has had difficulties in simply handling the number of complaints received. ... The FSA had originally imposed an eight week deadline for companies to respond to complaints, but then found it necessary to extend this deadline for several companies as they have struggled to cope with the surging number of complaints. The regulator has nevertheless informed the Committee that “all firms are expected to be back on track with complaints by the end of April 2004. Enforcement action will be pursued against any firms that continue to fail to deal with complaints fairly, consistently and promptly or fail to identify and remedy any recurring or systemic problems.

Endowment complaint success rates

The industry also seems to have initially adopted an unduly restrictive view of what constitutes reasonable grounds for a complaint. The FSA told us “we issued guidance, agreed with the Financial Ombudsman Service, in May 2001 on how firms, found to be responsible for mis-selling, should deal with complaints and calculate redress due”149 and that “to further emphasise the importance of this, in April 2002 John Tiner wrote to the chief executives of the largest firms. He set out best practice for the way in which firms should handle complaints and asked CEOs to review their firms' procedures and experience in the light of the letter.

The practical effect of what the industry now terms the “Tiner letter” has been a significant increase in the number of complaints that companies are upholding, from 52% in Q3 2002 to 63% in Q3 2003, although the improvement also reflects a series of targeted reviews following “an analysis of mortgage endowment complaints procedures for a sample of twelve large retail groups between 2001 and 2003.”

The FSA has also told us that it intends to conduct “an analysis in early 2004 of standards of complaints handling in a sample of smaller IFAs, to assess whether there is action we should take to improve complaints handling in that sector.”

The FSA has been persistent in its attempts to ensure that the companies handle complaints fairly and seems to have insisted on a general strategy of the customer being given the benefit of the doubt in cases where there is no clear evidence of whether the endowment policy was mis-sold or not due to inadequate documentation.

It is very disappointing that it has required sustained pressure from the FSA to ensure that companies handle complaints satisfactorily.

As with mis-selling, the need for repeated action to ensure fair treatment for customers seems to confirm that the insurance industry is locked into an unacceptable culture that focuses upon short term sales rather than long term customer care.

... Events have demonstrated that in the future the FSA needs to be much more rigorous in ensuring that its policies and strategies are being effectively implemented by the financial services industry.

Complaints to the Financial Ombudsman

The FOS stated that “of the 13,570 complaints the Financial Ombudsman Service resolved in 2002–03, 39% were upheld, either substantially, or in part, in the favour of the consumer.”

The FOS has further noted, however, that “in the case of some firms we are upholding 60% of complaints while in others we are upholding only 15%.”

It is unacceptable that some companies’ complaints handling processes are so flawed that the Ombudsman is upholding over 50% of consumer appeals against the companies’ decisions. The FSA should take swift action to ensure that these companies begin treating their customers more fairly.

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What about the consumer's right to know which companies are seen to be reasonable and which are more bloodyminded? If you're battling with a firm, you might like to know that.

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