Our Strategic Plan Our Strategic Plan aims to meet the six external dispute resolution (EDR) benchmarks prescribed by the Australian Securities and Investments Commission (ASIC). Our focus continues to be on delivering a more efficient and effective dispute resolution service, enhancing our public role and stakeholder engagement, and building our organisational capability and sustainability. Our focus areas Delivering a more efficient and effective dispute resolution service Enhancing our public role and stakeholder engagement Building our organisational capability and sustainability What we want to be A customer-centric service An organisation that is adaptable, able to effectively deal with change and provide excellent dispute resolution to all users, including vulnerable consumers A trusted organisation The authority on financial services dispute resolution, shares its experience and insights and actively engages with all its stakeholders A smart, efficient and responsible organisation An organisation with passionate people, effective systems, clear plans and a conscience What we need to do Eliminate any dispute queues and sustainably prevent future queues emerging Continue to embed an accessible, flexible and responsive approach to dispute resolution Enhance user experience Maintain and enhance the quality of our dispute resolution service Provide clear and fair outcomes that ‘feel fair’ Promote our service, actively engage and maintain stakeholder support Share our knowledge, experience and insights Raise community awareness of FOS Routinely seek stakeholder feedback and act on it Attract, retain and develop highly skilled and engaged people Embed new ways of working as part of our desired behaviours and culture Develop and enhance physical and technical resources to future-proof the organisation
How we classify financial products Percentages below are for disputes accepted in 2017-18 Credit 43% Business finance Business credit card Business loans Commercial bills Hire purchase/lease Letter of credit Line of credit/overdraft Non-FSP debt Consumer credit Construction loans Credit cards Equity release Hire purchase/lease Home loans Interest-free finance Investment property loans Line of credit/overdraft Non-FSP debt Personal loans Short-term finance Guarantees Bank guarantee Business guarantee Consumer guarantee Margin loans General insurance 32% Domestic insurance Consumer credit insurance Home building Home contents Motor vehicle – comprehensive Motor vehicle – third party fire and theft Motor vehicle – third party theft Motor vehicle – uninsured third party Personal and domestic property – caravan Personal and domestic property – domestic pet Personal and domestic property – horse Personal and domestic property – mobile phone Personal and domestic property – moveables Personal and domestic property – pleasure craft Personal and domestic property – trailer Personal and domestic property – valuables Residential strata title Sickness and accident insurance Ticket insurance Travel Trust bond Extended warranty Browngoods Motor vehicles Whitegoods Professional indemnity insurance Medical indemnity Other professional indemnity Small business/farm insurance Commercial property Commercial vehicles Computer and electronic breakdown Contractors all risk Fire or accidental damage Glass Industrial special risk Land transit Livestock Loss of profits/business interruption Machinery breakdowns Money Public liability Theft Deposit taking 8% Current accounts Business transaction accounts Foreign currency accounts Mortgage offset accounts Passbook accounts Personal transaction accounts Safe custody Savings accounts Bank bills Cash management accounts First home buyer accounts Online accounts Term deposits Payment systems 6% Direct transfer ATM Bank drafts Cheques Counter transactions Direct debits EFTPOS Electronic banking Foreign currency transfers Merchant facilities Telegraphic transfers Non-cash Loyalty programs Non-cash systems Stored value cards Travellers’ cheques Investments and advice 6% Derivatives/hedging Contracts for difference Cryptocurrency Foreign exchange Forwards Futures Options Swaps Managed investments Australian equity funds Cash management accounts Charitable/educational schemes Film schemes Horse schemes International equity funds Investor direct portfolio services Managed discretionary accounts Managed strata title schemes Mixed asset funds Mortgage schemes Primary production schemes Property funds Timeshare schemes
Trustee common funds Real property Securities Bills of exchange Bonds Debentures Exchange traded funds Promissory notes Shares Warrants Superannuation Account-based pensions Approved deposit funds Corporate funds Industry funds Pooled trusts Retail funds Retirement savings accounts Self-managed funds Life insurance 4% Income stream risk Consumer credit insurance Income protection Non-income stream risk Annuities Endowments Funeral plans Scholarship funds Term life Total and permanent disability Trauma Whole of life Traditional trustee services <1% Estate management Estate planning Enduring powers of attorney Wills Trusts Beneficiary Specific purpose 1. Products We handle disputes across many areas of financial services. Our classification system divides these disputes into product types. There are seven main product types: credit, deposit taking, general insurance, investments and advice, life insurance, payment systems and traditional trustee services. There are 23 product categories within these product types and 135 individual products. As the diagram below demonstrates, we receive many disputes about some products, such as credit and general insurance, and only a very small number about other products, such as traditional trustee services. Accepted disputes by product line in 2017-18
Total disputes accepted We accepted 22,962 disputes in 2017-18. This was 2% more than last year (the second year in which all disputes lodged with us were first referred back to the FSP’s internal dispute resolution process). Accepted disputes are those that the FSP and consumers could not resolve and then progress into Case Management at FOS. At the beginning of Case Management, we review and allocate disputes into one of the following work streams: Fast Track disputes – generally low-value disputes with a single primary issue, do not require detailed investigation and suitable for fast information gathering and negotiation or decision. Standard disputes – may require FOS to investigate, gather and consider more information but generally involve straightforward issues and more likely to be resolved by agreement. Complex disputes – generally require detailed investigation and consideration, and may involve a number of issues. These disputes are less likely to resolve by agreement through negotiation or conciliation, and more likely to require a decision by FOS. Disputes that may be outside our jurisdiction are allocated to our Terms of Reference team to assess and determine whether we can consider them. Disputes accepted into Case Management by stream 2016-17 2017-18 Stream Number % Number % Fast Track 8,297 37 8,286 36 Standard 5,644 25 6,174 27 Terms of Reference 5,464 24 5,502 24 Complex 3,030 13 2,960 13 Total 22,475 100 22,962 100 Note: As at 30 June 2018, 40 disputes were yet to be streamed. Accepted disputes by product line In 2017-18, credit disputes accounted for 43% of all accepted disputes (the same as last year), followed by general insurance 32% (down three percentage points from last year). Number % Credit 11,295 43 General insurance 8,603 32 Deposit taking 2,195 8 Payment systems 1,656 6 Investments and advice 1,524 6 Life insurance 1,117 4 Products outside Terms of Reference 161 1 Traditional trustee services 19 0 Total 26,570 100 Note: The total in this table is based on counting cases about multiple products and issues as multiple disputes. For further explanation of this distinction, see ‘How we count disputes’ on page 63. Accepted disputes by month FOS accepted an average of 1,914 disputes a month in 2017-18, up from 1,873 last year. Our busiest month was May 2018 and our quietest month was January 2018.
Code team: 2017-18 at a glance Codes of practice 5 Independent code compliance committees 5 Committee meetings 39 FSPs subscribing to the codes 578 Annual reports published 4 Special report (see page 131) 1 Annual compliance statements, self-certifications, annual returns and desktop audits reviewed 547 Code breaches self-identified 22,550 Code breaches assessed as significant 79 Onsite visits and verification teleconferences 67 Own motion inquiries 5 New investigations of alleged breaches of industry codes of practice 292 Investigations cases closed 236 Breaches of codes identified through investigations 98 Meetings with regulators, industry associations, consumer advocates and other stakeholders 57 Information bulletins and other publications issued 23 Presentations and training sessions conducted 28 Conferences and forums attended 10
Case study Driver’s exclusion should have been listed in policy document An insurer who told a consumer, Mr G, during a phone call that he would not be covered for comprehensive motor vehicle insurance because of his driving history, breached the General Insurance Code of Practice by not listing him as an excluded driver in the policy documentation. Mr G rang the insurer to arrange comprehensive motor vehicle insurance for his car, which he and Mrs G would be driving. The insurer advised him during the telephone call that he would not be covered and then issued policy documentation for the insurance to Mr and Mrs G as co-insured (policyholders). The documentation did not list Mr G as an excluded driver. Seven months later, Mr G lodged a claim for damage caused to the car while driving it. The insurer denied the claim on the basis that Mr G was excluded from cover (as advised during the phone call). The insurer said it was entitled to rely on the verbal notification made to Mr G that he would not be covered as a driver. The General Insurance Code Governance Committee found that the insurer had breached subsection 4.4 of the code. This subsection requires code subscribers to conduct their sales process in a fair and transparent manner. The committee found that the phone conversation with the insurer’s staff member resulted in an unfair sales process. Mr and Mrs G would have proceeded on the basis that because they were listed as co-insured on the policy documentation, Mr G was covered when driving the car. The committee said it was unfair to expect a consumer who had bought an insurance product to remember what was discussed over the phone, possibly months previously, particularly when the consumer was excluded from cover, and not reflected in the policy documentation. To avoid confusion, the insurer should have endorsed the policy documentation by listing Mr G as an excluded driver. The committee is discussing with the insurer how to prevent this happening again.