Watchdog preps for “significant” increase in complaints in wake of pandemic

Friday 04 June 2021

Consumer complaints against financial services providers regarding debt repayments and insurance claims are expect to rise significantly as a result of the pandemic, according to the Channel Islands Finance Ombudsman.

The CIFO’s board and management had already experienced an in increase in complaints of 5% in 2020, with a total of 409 complaints relating to 139 financial service providers received, according to their annual report.

This was despite the number of complaints opened in the middle of the year being significantly down during the height of the pandemic restrictions, with complaint volumes concentrated in Q1 and Q4 of 2020.

In addition, the number of complaints falling within the remit of the finance ombudsman increased from 38% to 53% between 2019 and 2020. During the last three months of 2020, the number reached its highest level since the creation of the CIFO in 2015.

Two thirds of the case files (74%) were successfully resolved through informal mediation rather than a formal binding ombudsman decision, with a majority of the cases (57%) resolved in favour of the complainants, 10% more than in the previous year.

Pictured: The CIFO received a “notable” number of enquiries and complaints related to business interruption insurance claims arising as a result of the covid-19 pandemic.

Throughout the year, the CIFO received a “notable” number of enquiries and complaints related to business interruption insurance claims arising as a result of the covid-19 pandemic.

This surge in enquiries took place despite public health restrictions affecting customers’ ability to file a complaint as Douglas Melville, the Principal Ombudsman and Chief Executive, explained.

“Many financial consumers and microenterprises faced significant financial distress due to restrictions imposed and economic impacts arising from the covid-19 emergency. Not surprisingly, this gave rise to some customer complaints. While the nature of complaints in 2020 was largely similar to those we expect to see in more normal times, the combination of social restrictions and economic stress clearly created heightened levels of anxiety and, in some cases, made it more logistically challenging to register a complaint with financial services providers (FSPs).”

The complaints received so far about business interruption insurance, which is also known as business income insurance, arose from losses caused by government-imposed restrictions in response to the pandemic and the  rejection of insurance claims by the insurer.

In its annual report, the CIFO noted future decisions in such cases will be informed by a decision from the UK Supreme Court who disagreed with insurers who had refused to cover such claims.

They have issued guidance for business interruption insurance policyholders suggesting how they should bring a claim forward and what to do if the answer from their insurance company is not satisfactory.

The CIFO’s board and management is expecting this type of complaints to increase “significantly” in the second half of 2021, along with those linked to debt repayment and collections, other insurance claims as well as investment and pension portfolios. A “single-issue” complaint affecting several hundred individual customers is also expected to give rise to more complaints in the second and third quarter of the year.

To deal with the anticipated surge in complaints, they have been using additional resources to reduce the number of complaints on-hand and create more capacity.

“We have engaged some experienced people from the UK who have done some work with the ombudsman in London to work on older complaint files,” Mr Melville explained.

“We are a very small team and it has been really valuable for us. We managed as of last year to bring them on stream. It’s a good solution for everyone involved, the firm and the consumers. We have always had more volume than we were resourced for, we have been clearing the inventory as fast as we can but not at the expense of getting it right.”