Insurers have expressed concern over threats being made by consumers to report them to the Insurance Ombudsman Bureau.
At present, an insurer must pay £500 plus a turnover related levy for any complaint that the ombudsman investigates, even if the ruling goes in the favour of the provider. Some customers, often those who are disgruntled by an insurer’s refusal to pay out following non-disclosure, have been taking advantage of the system by threatening to take the provider to the ombudsman.
The cost of paying the claim is frequently lower than the ombudsman’s charge and some providers are now objecting that this is taking consumerism too far. The system effectively allows customers to bully insurance companies as it is cheaper for insurers to give customers £500 than to go through the procedure.
David Potter, director at OHRA UK, said: “We are having blackmail applied to us.” He described some instances where consumers were threatening to take a complaint against them to the ombudsman, should it refuse to pay out.
Potter said that while OHRA refuses to bow to threats, he is concerned by the extra costs entailed by the company as a result of an ombudsman investigation.
“We have a responsibility to protect our policyholders against these costs,” he said. “The only alternatives are to reduce the fee or ask the consumer to pay should the ombudsman rule in the insurer’s favour, but this is not the approach the ombudsman likes to take.”
It has also been suggested that spreading the cost across the insurance industry may provide a solution.
A spokesperson from the Insurance Ombudsman Bureau said that “the ombudsman is the final arbiter of any member company’s complaints procedure”.
Other providers have said the system has always been efficient. “We’ve always been impressed with our dealings with the ombudsman, it has always done a thorough job” said Gillian Gibbons, public relations manager at Prime Health.
“It is a good system and although it is a lot of money we are in favour of the ombudsman system,” she added.