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Insurance regulation, dispute- resolution and compensation in the United Kingdom David Thomas

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

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Insurance regulation, dispute- resolution and compensation in the United Kingdom David Thomas

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

  2. 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

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

  4. 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

  5. 3 bodies established by law • Financial Services Authority (FSA) • Financial Ombudsman Service (FOS) • Financial Services Compensation Scheme (FSCS)

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

  7. regulation of financial providers FSA • makes and polices the rules • supervises financial services providers • prudential regulation • conduct-of-business regulation www.fsa.gov.uk

  8. regulation of financial providers European Union (EU)

  9. 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.

  10. resolution of claims by consumers 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

  11. 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 www.financial-ombudsman.org.uk

  12. 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

  13. resolution of claims by consumers FOS workload phone enquiries399,918 mediate or recommend full cases 127,471 ombudsman decisions 10,198 totalenquiries 789,877 written enquiries 389,959 Figures for year to 31 March 2009 UK population = Uzbekistan x 2.2

  14. resolution of claims by consumers Breakdown of FOS cases

  15. 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

  16. resolution of claims by consumers European Union (EU)

  17. resolution of claims by consumers • European network of financial redress bodies • cooperate on cross-border claims • meet six-monthly www.fin-net.eu

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

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

  20. compensation for 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

  21. 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 www.fscs.org.uk

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

  23. paying for the system The other 75% of the cost of FOScomes 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

  24. Further information FSA: www.fsa.gov.uk FOS: www.financial-ombudsman.org.uk FSCS: www.fscs.org.uk E-mail: david.thomas@financial-ombudsman.org.uk

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

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