The Financial Ombudsman Service (FOS) Australia received record dispute numbers in 2016-17, according to new data published today.
The Annual Review shows that FOS received 39,479 disputes, a 16% increase from last year, after a 7% increase the previous year.
The increase was driven by continued growth in general insurance disputes. The number of general insurance disputes received (13,200) increased by 2,612, accounting for about 38% of the overall increase.
FOS said the increase in general insurance disputes was due to a continuation of industry-specific issues including higher claim numbers, organisational changes and the impact of Cyclone Debbie, all of which may have affected insurers’ internal dispute resolution.
Resolving disputes more quickly and efficiently
Overall, FOS reduced the average time taken to resolve disputes by 13% in 2016-17 and 43% from the previous year without compromising the quality of outcomes. A major challenge this year has been the increase in disputes received (from 34,095 to 39,479).
“This means that people can have their cases resolved more quickly and get on with the rest of their lives,” Chief Ombudsman Shane Tregillis said.
FOS resolved disputes in an average of 54 days in 2016-17 compared with 62 days last year and 95 days in 2014-15. It also closed 44% of disputes within 30 days (up one percentage point from last year and double the previous year’s 22%).
The record number of disputes have put pressure on staff workloads and we saw some queues re-emerge in the second half of the year. In response to this, we have recently recruited additional ombudsmen and other staff to ensure we can handle the anticipated high volume of disputes we continue to receive.
Financial difficulty disputes continue to decline
Financial difficulty disputes, which occur when a consumer is unexpectedly unable to meet their payment obligations, fell again in 2016-17.
Chief Ombudsman Mr Shane Tregillis said this was due to improvements that FSPs were continuing to make in managing hardship requests and complaints from customers in financial difficulty, consistently low interest rates (which had reduced repayment pressures for many borrowers), and improvements to the FOS process.
Systemic issues a key priority
A key focus again was on systemic issues. FOS identified and referred 192 possible systemic issues to FSPs for response and resolved 66 definite systemic issues. FSPs said more than 940,000 customers were affected by these systemic issues, leading to significant refunds and other remedies such as amendments to, or removal of, credit listings.
In 2016-17, FOS continued working to make its service as open and accessible as possible. “Every person who comes to us has specific circumstances that we need to take into account,” Mr Tregillis said.
As part of its work in response to the Victorian Royal Commission, FOS encouraged applicants to identify if family violence was a factor in their dispute. We also developed partnerships with expert services to help staff understand and help people affected by family violence and financial elder abuse.
A key achievement was completing the FOS Reconciliation Action Plan and having it endorsed by Reconciliation Australia. The plan outlines 16 key initiatives to help make FOS more accessible to Aboriginal and Torres Strait Islander peoples.
What the disputes were about
FOS accepted 22,475 disputes in 2016-17. Of these, there were:
- 10,973 credit disputes (43%)
- 8,756 general insurance disputes (35%)
- 1,861 deposit-taking disputes (7%)
- 1,331 payment system disputes (5%)
- 1,292 investments and advice disputes (5%)
- 1,018 life insurance disputes (4%)
Total disputes accepted (22,475) are based on counting disputes that may involve multiple products or issues as single cases.
Of credit disputes, one-third (33%) involved credit cards, one-quarter (24%) involved home loans and one-fifth (19%) were about personal loans. Of all disputes accepted by FOS, credit cards were involved in 14%, home loans 10% and personal loans 8%. Some 10,464 disputes (or 41% of all disputes FOS accepted) involved banks. This was a slightly lower proportion than in 2015-16. Disputes involving banks were mainly about FSP decisions (23%) and financial difficulty (20%).
Of general insurance disputes, almost one-third (31%) involved motor vehicle – comprehensive insurance and more than one-quarter (28%) involved home building insurance. The main issues were claim amount (20%), denial of claim (18%) and denial of claim – exclusion/condition (16%).
Of deposit-taking disputes, 63% involved personal transaction accounts and the main issue was unauthorised transactions (29%). Of payment system disputes, 28% involved non-cash systems and the main issue was interpretation of product terms and conditions (28%).
Of investments and advice disputes, 25% involved mixed asset funds (investing in multiple asset classes such as cash, bonds, shares and property), and the main issue was inappropriate advice (24%). In life insurance, almost half (48%) the disputes involved income protection insurance, and the main issue was denial of claim (26%).
External dispute resolution review
FOS contributed throughout the year by making submissions to the Government’s review of the financial system’s external dispute resolution (EDR) and complaints framework.
FOS advocated that changes to current dispute arrangements should build on the proven features of the industry ombudsman model, and be designed to simplify, strengthen and increase access to timely, cost-effective and efficient EDR for individuals and small business.
The key elements of the industry ombudsman model remain at the heart of the Government’s plans for a single EDR scheme, which is to be called the Australian Financial Complaints Authority.
Links: FOS Annual Review
Virginia Wallace, 03 9613 7470 | [email protected]