Now Guardian Royal Exchange has bought the PPP Group, the pressure is on for the company to join Insurance Ombudsman’s Bureau.
GRE, and its health subsidiary Guardian Health, are both members of the Ombudsman scheme, which is seen as a means of both customer protection and reassurance – but PPP is not.
While most health insurers, along with the majority of general insurance companies, are members of the Insurance Ombudsman Bureau, PPP instead refers complaints to the Personal Insurance Arbitration Service (PIAS), run by the Institute of Arbiters.
Nye Jones, marketing services manager at Guardian Health, says: “At present discussions are still underway. Both services provide an effective means of dealing with customer disputes. But for the sake of consistency it would make sense to use the same system. This will be something that is looked at as part of the integration programme.”
Other notable exceptions from the IOB scheme are BUPA, BCWA and Exeter Friendly.
Critics of the PIAS claim few policyholders are aware of this service, meaning genuine complaints and disputes may not be heard.
Michael Lovegrove, a spokesman for the Ombudsman’s office, says: “To be credible in the eyes of the public, an arbitration or complaints procedure has to be accessible to all policyholders.
“Last year the Insurance Ombudsman office dealt with 113 disputes relating to medical expenses. Considering we are only handling insurers that account for around 25% of the market, this would indicate that a reasonable proportion of policyholders are having problems with PMI cover, and feel that their complaints are not being handled effectively by the insurer.”
He adds: “In contrast, PIAS which has both BUPA and PPP as members, and is therefore representing about 75% of the market, only dealt with six medical insurance complaints last year. This does not seem right. From our experience we would expect the PIAS to be listening to between 300-400 cases a year. We would like to know what has happened to those policyholders?”
There is very little publicity about the PIAS. The Institute of Arbiters does not publish any annual report. Even when the PIAS has adjudicated in favour of the policyholder, the details of the ruling against the insurer are not made public.
But both BUPA and PPP are adamant that the PIAS provides an effective and efficient system that meets its policyholders’ needs.
John Neville, a spokesman for PPP healthcare, says: “PIAS is a completely independent service for customers to have their complaints properly considered and settled. It is part of our customer complaints service and is clearly spelt out in all our customer care handbooks.”
He says most disputes over claims and complaints are settled between the PPP and its policyholders, but arbitration remains an effective “last resort”.
This was echoed by BUPA. A spokeswoman says: “PIAS has tightened up its rules lately. It is now able to decide what is fair and reasonable – not just whether a claim is eligible or not. BUPA accepts a PIAS decision.”
The PIAS has been quick to reply to the Ombudsman’s criticisms of its service. Gregory Hunt, scheme development manager at PIAS, says: “There has been a lot of misinformation about the PIAS scheme. Insurers cannot refuse arbitration, and they are legally bound to abide by the arbitration decision, although claimants are not. Like the Ombudsman scheme, if policyholders disagree with the outcome they still have the option of pursuing the claim through the legal system.”
He adds: “This change in the rules was requested by our insurer members, as they felt it gave consumers greater protection and brought the service in line with the Ombudsman’s scheme. These changes have been backed by the DTI, the ABI and the Consumers’ Association.” Hunt says that the small number of cases settled last year does not indicate that the scheme is ineffective: “We get a lot more enquiries and requests for information but most of these do not go to arbitration.”
He adds: “Most of these cases will be settled by the insurer. As they have to pay for arbitration it is in their interest to resolve the matter with the claimant. Settling a case can often be cheaper that going to arbitration.”
The arbitration system in place is similar to the Ombudsman scheme – the claimant puts forward their case with evidence, the insurer has the opportunity to defend their stance, and then the claimant is given the chance answer to the insurers’ evidence before the arbitrator or Ombudsman goes away to consider and make a judgement. The whole process generally takes about three months from start to finish.
Hunt insists the PIAS scheme is more cost-effective than the IOB scheme. Insurers only pay for each arbitration case as there is no annual levy.
But Lovegrove of the Ombudsman’s office adds: “The Bureau is more expensive – but then you pay for what you get.”
Hunt also defends the PIAS decision not to publish annual reports on cases heard throughout the year. He says: “Arbitration is defined under the law as a private resolution between two parties. It would be against the law to publish the results. If this makes insurance companies more likely to use the service then this has to be good for policyholders.”
He adds: “Under arbitration insurers are legally bound to abide by the jurisdiction of the arbitrator. Under the Ombudsman’s scheme, insurers are bound to abide by his decision. But there is nothing to stop them cancelling their membership and revoking his decision – they would no longer be members of the Ombudsman scheme but they would not be breaking any law.”
But the argument regarding which service provides better customer protection could soon become academic. The latest Government proposals suggest there should be a super-Ombudsman dealing with all consumer disputes across the financial services industry. This new role would combine the functions of the Insurance, Banking, Building Society and Investment Ombudsman, as well as the PIAS, and come under the control of the Financial Services Authority.
This would certainly simplify the complaints procedure for policyholders, but the move has sparked fears that, with such a wide remit, consumer interests maybe overlooked.
Andrew Chapman, managing director of Permanent Insurance, says: “At present we use the PIA Ombudsman for income protection disputes. We were members of the Insurance Ombudsman two or three years ago but the PIA was putting pressure on a lot of protection and investment companies to come under its Ombudsman’s jurisdiction.”
He adds: “I do have some worries about the new super Ombudsman being proposed by the FSA, but then the present system is far from perfect.”
He adds: “The Ombudsman’s decision is not binding on the claimant. If the ruling goes against the claimant there is nothing to stop them going to court having seen all the defendant’s evidence.”
Chapman adds: “There is little evidence to prove it, but I believe that some insurers have subsequently lost court cases after having the Ombudsman rule on favour of them. This cannot be fair. It might not be a popular view but we have to question the commercial basis of the Ombudsman scheme. Insurance companies have to look at the quality of decision-making under each of the schemes and make a decision based on that criteria.”
Hunt of PIAS says: “I imagine that this new system would try to pick the best features of the existing schemes. We are currently consulting with the Government on the form that this would take. Arbitration would certainly play a part in this system.”
But it is not expected that this would be operational at least for the next two years. In the meantime insurers are still debating the best way to ensure that their policyholders get a fair hearing in the event of a claims dispute.