October 6, 2017
Disputes lodged with the Financial Ombudsman Service (FOS) reached a record level after increasing by 16% over the past 12 months but disputes regarding life insurance remain relatively low.
FOS stated it received 39,479 disputes in the last financial year, up from 34,095 in 2016, driven by a continued growth in general insurance disputes.
Of the disputes received 22,475 were accepted and of those only 4%, or 1,018 disputes, were related to life insurance, a decrease of 7% on the previous year’s number of 1,095 disputes.
The Service released the statistics as part of its Annual Review, which also shows that life insurance advice related disputes have continued to remain low accounting for less than 10% of life insurance related disputes.
FOS separated life insurance disputes into income stream and non-income stream products and then further sorted the disputes into sales and service channels.
“Financial Service Providers gave insufficient warning before ceasing benefits, did not provide enough explanation…or requested too much or irrelevant information…”
The service said that for the 533 disputes for income stream products, life insurance advice related disputes accounted for only 7%, or 37, of all disputes, while complaints about life insurers accounted for 71%, or 378, of all disputes.
For the 424 disputes received about non-income stream products, complaints about financial advice accounted for 8%, or 34, of all disputes while complaints about life insurers accounted for 68%, or 288, of all disputes.
The low-levels of advice related disputes reflects previous reports released by FOS which also reported low levels of complaints with advisers compared with higher levels of complaints with life insurers (see: Risk Advice Source of Few Complaints).
FOS also stated that the most common source of complaint in the income stream product area was income protection insurance which was the cause of 92% of disputes with a denial of claim, delays in claim handling and claim amounts being the most common complaints.
“Common issues in income protection disputes were that Financial Service Providers (FSP) gave insufficient warning before ceasing benefits, did not provide enough explanation about why benefits would cease or requested too much or irrelevant information of beneficiaries before making a claims decision,” the Review stated.
More than half of the complaints in the non-income stream area related to a decision made by a FSP where disputes were spread across term life (35%), TPD (25%) and trauma (28%) product channels, with denial of claims and claims handling delays being the most common reason people lodged disputes.