Insurance regulation, dispute- resolution and compensation in the United Kingdom David Thomas corporate director and principal ombudsman Financial Ombudsman Service

Insurance in the UK Total yearly premiums of 33 billion GBP / 38 billion EUR / 52 billion USD / 77,000 billion UZS UK provides 11% of worldwide insurance. Second only to USA ( 30%) whose population = UK x 5

Financial services (including insurance) depend on consumer trust and confidence

Trust and confidence requires regulation of financial providers, to be financially sound and behave well resolution of claims by consumers, if things go wrong compensation for consumers if the financial provider becomes insolvent

3 bodies established by law Financial Services Authority (FSA) Financial Ombudsman Service (FOS) Financial Services Compensation Scheme (FSCS)

Financial Services Authority (FSA) regulates insurers and insurance advisers investment/pension providers and advisers banks and electronic money providers mortgage lenders and advisers stockbrokers regulation of financial providers

FSA makes and polices the rules supervises financial services providers prudential regulation conduct-of-business regulation regulation of financial providers

European Union (EU) regulation of financial providers

EU standards and regulatory passport A financial provider regulated in one EU state can: provide services cross-border from its home state to consumers in other EU states open branches in other EU states after registering (by right) with the local regulator. regulation of financial providers

Financial Ombudsman Service (FOS) resolves disputes between consumers and financial providers not a regulator an alternative to the civil courts informal / quicker / cheaper free to consumers also encourages complaint resolution/prevention resolution of claims by consumers

FOS covers UK branches of financial providers, whether UK or foreign owned takes complaints from individuals and small businesses, worldwide resolution of claims by consumers

Consumers must complain to the financial provider first Financial providers must respond to both oral/written complaints deal with them promptly give written final response within 8 weeks tell the consumer about FOS resolution of claims by consumers

total enquiries 789,877 written enquiries 389,959 Figures for year to 31 March 2009 UK population = Uzbekistan x 2.2 FOS workload full cases 127,471 mediate or recommend ombudsman decisions 10,198 resolution of claims by consumers phone enquiries 399,918

Breakdown of FOS cases resolution of claims by consumers

We decide what is fair in the circumstances of each case taking into account law FSA rules good industry practice We can award compensation up to 100,000 GBP / 114,000 EUR / 160/000 USD / 230,000,000 UZS resolution of claims by consumers

European Union (EU) resolution of claims by consumers

European network of financial redress bodies cooperate on cross-border claims meet six-monthly resolution of claims by consumers

1998 European principles for out-of-court redress bodies Standards for –   transparency   due process   independence   legality   effectiveness resolution of claims by consumers

Other insurance or financial services ombudsmen outside Europe include Armenia Australia Chile Kazakhstan New Zealand South Africa Trinidad and Tobago resolution of claims by consumers

Financial Services Compensation Scheme (FSCS) covers consumer claims if a financial provider becomes insolvent Separate compensation funds for each sector (for example, insurance) Insurance fund paid for by contributions from all insurers compensation for consumers

FSCS will pay Compulsory insurance (to cover claim by third party) 100% of claim, no limit to amount Voluntary insurance (to cover claim by customer) 90% of claim, no limit to amount compensation for consumers

FSA bills each insurer yearly for its share (based of premium income) of the cost of FSA 25% of the cost of FOS the cost of FSCS paying for the system

The other 75% of the cost of FOS comes from case fees payable by the insurer Its first 3 cases a year are free Each extra case costs 500 GBP / 570 EUR / 800 USD / 1,163,000 UZS * * About the weekly pay of a bus driver or secretary paying for the system

Further information FSA: FOS: FSCS:

Insurance regulation, dispute- resolution and compensation in the United Kingdom David Thomas corporate director and principal ombudsman Financial Ombudsman Service