Consumer financial services in britain: New approaches to dispute resolution and avoidance

European Business Organization Law Review

Volumn 3, Issue 3, 2002, Pages 649-694

  Samuel, Adam ^a  

^a BOSTON UNIVERSITY   (United States)

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EID: 84922845056     PISSN: 15667529     EISSN: 17416205     Source Type: Journal    
DOI: 10.1017/s1566752900001099     Document Type: Article

References (111)

1. H. Motulsky, Ecrits (Paris: Dalloz 1974) at p. 5.
2. Equitable Life Assurance Society v. Hyman [2002] 1 AC 408
3. Announced in the Financial Services Authority Annual Report 2000-2001.
4. Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation, OJ L 9, Vol 46, 15 January 2003 at p. 3, Art. 9 (1). Art. 8 requires Member States to ensure the setting up of a facility for interested parties to register complaints.
5. The figure quoted was given by T. Boorman at a conference in London, 19 June 2002
6. Financial Ombudsman Service Annual Review 2000-2001, at p. 1.
7. W. Merricks, "Looking forward to a new ombudsman", Speech to the Association of Independent Financial Advisers National Conference, 20 September 2000, published on
8. Ombudsman News, February 2002, at p. 3. This publication is issued regularly by the Financial Ombudsman Service.
9. K. Jebens, LAUTRO: A Pioneer Regulator 1986-1994 (CF Jebens Salisbury 1997) at p. 25.
10. See LAUTRO Enforcement Bulletin (EB), 3 at 2.03; 10 at 2.20-1.
11. Financial Services Act 1986 ss. 7-11. Insurers were automatically authorised by s. 31. The Act refers to the Secretary of State rather than SIB. The Secretary of State duly delegated his powers to SIB in the Financial Services Act 1986 (Delegation) Order SI 1987/942.
12. The National Association of Securities Dealers and Investment Managers (NASDIM).
13. See for example Newsholme Brothers v. Road Transport and General Insurance Co Ltd [1929] KB 356, as compared with Stone v. Reliance Mutual [1972] 1 Lloyd's Rep. 469.
14. Sun Life of Canada v. Jervis [1943] 2 All ER 425.
15. Sofi v. Prudential Assurance Co [1993] 2 Lloyd's Rep. 559.
16. Malhi v. Abbey Life (CA unreported except Times, 2 June 1994), "a case on policyholder non-disclosure". This decision can be justified on the basis that the investor broke the duty of the utmost good faith by failing to disclose the relevant health information. The Court concluded probably wrongly that information held by a claims department could not be said to have been disclosed to the underwriting area.
17. S. Harris, "Does the Insurance Industry need an Ombudsman?", unpublished paper, 26 September 1975, at p. 1. This is the paper that originated the idea of having a private sector Ombudsman. Copies of this and other unpublished items referred to in this paper can be obtained from the author.
18. Parliamentary, National Health Service and Local Government Ombudsman Schemes are good examples of this.
19. Insurance Ombudsman Bureau Company Prospectus, para. 3 (iv). The Ombudsman had the power to make recommendations to firms that they pay more than this amount. See Terms of Reference, para. 2 (f) in Insurance Ombudsman Bureau Annual Report 1989, at p. 27. There was further clarification of this in an amendment reported in Insurance Ombudsman Bureau Annual Report 1992 in the Chairman's Foreword.
20. Terms of Reference 2 (b-c), Insurance Ombudsman Bureau Annual Report 1990, at p. 26.
21. Insurance Ombudsman Bureau Annual Report 1993, at p. 57.
22. See, though, Insurance Ombudsman Bureau Annual Report 1989, at pp. 29-30, and Insurance Ombudsman Bureau Annual Report 1992, at pp. 24-26.
23. See the Insurance Ombudsman Bureau Annual Report 1981, at p. 12, and Insurance Ombudsman Bureau Annual Report 1994, at p. 53 for the later version of the Terms of Reference, paragraph C.
24. Insurance Ombudsman Bureau Annual Report 1992, at p. 6-7.
25. Para. 4 (d) Insurance Ombudsman's Terms of Reference in the Insurance Ombudsman Bureau Annual Report 1992, at p. 55.
26. The original Terms of Reference in PIAOB Annual Report 1994-1995 at p. 48 contained no such exception para 6.1 (a)(vi). It was altered in 1996-1997. See the Annual Report 1996-1997 at pp. 18, 66 & 71.
27. By the end of its second year, the Insurance Ombudsman Bureau Annual Report 1982 reported that only 38 corporate groups had joined. See pp. 35-38. See also Chairman's Foreword to the Insurance Ombudsman Bureau Annual Report 1995, at iv.
28. Insurance Ombudsman Bureau Annual Report 1981, at p. 10, comments that the Ombudsman never had to issue an award. This was connected to the fact that the first Ombudsman, James Haswell, liked to speak to companies against whom he intended to issue an award.
29. Such a meeting was held in the case which later became R. v. Insurance Ombudsman Bureau ex parte Aegon Life [1995] LRLR 101. Reference was made to this meeting in court although not in the judgement. It may have influenced Aegon's decision to abandon its argument relating to natural justice during the hearing.
30. R. v. Insurance Ombudsman Bureau exparte Aegon Life [1995] LRLR 101.
31. Insurance Ombudsman Bureau Annual Report 1990, at p. 5.
32. Insurance Ombudsman Bureau Annual Report 1992, in the Chairman's Foreword.
33. Chairman's Foreword to the Insurance Ombudsman Bureau Annual Report 1995, at iv. See Insurance Ombudsman Bureau Annual Report 1995, at pp. 19-21. It may not be entirely insignificant that the 1996 Annual Report was delivered by a new Ombudsman.
34. Chairman's Foreword to the Insurance Ombudsman Bureau Annual Report 1995, at iii describes these tensions somewhat disingenuously. Insurance Ombudsman Bureau Annual Report 1991, at p. 12. The manuscript was amended (as can be seen) following a Council meeting attended by a representative of a company that to this day markets the product in question.
35. See Adjournment Debate in the Irish Seanad for 23 April 1998, in which Bill McLoughlin's letter is quoted from extensively.
36. TPR Social Legal Research, Consumers' Experience of Ombudsman Schemes (London 1992) at pp. 9-11. See also the conclusions at (ii).
37. Building Societies Ombudsman Annual Report 1994-1995, at pp. 4, 5, 7 and 11.
38. The Financial Services Authority Annual Report 2000-2001 notes allegations made by the firm that it has a cause of action against the FSA which the regulator has been advised has no realistic chance of success. KWIAG, an investors action group was formed to seek compensation for investors.
39. R. v. Insurance Ombudsman Bureau ex parte Aegon Life [1995]LRLR 101,atpp. 105-106.
40. See The Insurance Ombudsman Bureau Annual Report 1986, at p. 35.
41. P Morris and J Hamilton, "The Insurance Ombudsman and PIA Ombudsman", Carnegie Trust paper, at p. 8.
42. Chairman's Foreword to the Insurance Ombudsman Bureau Annual Report 1995.
43. See Donald Dewar MP's speech in the House of Commons, 30 March 1994.
44. H. Young, One of Us (London: Macmillan 1989) at pp. 441-443.50 See the Business Editorial, Daily Telegraph, 3 August 1995, at p. 21. I was the second Ombudsman concerned. The Chairman of the Council, Baroness Turner of Camden, whose decision it ultimately was, left her post as Labour spokesman in the House of Lords as a result of her being a director of IGA, a lobbying group alleged to have been involved in paying cash to Members of Parliament and for speaking publicly in support of Ian Greer of that company. Her version of events can be found in Appendix 113 to the First Report of the Select Committee on Standards and Privileges 1997-1998, and on the Internet. The PIA did not take the same view of her conduct.
45. PIA Regulatory Update 8, at p. 2.
46. SIB Press Release, "SIB Recognises PIA as New Retail Regulator", 22 June 1994 accompanied a Statement by the Securities and Investment Board, "The Recognition of the Personal Investment Authority (PIA)", Annex B at para. 20.Para. 5.4 in the original version.
47. The letter of 12 April 1995 was sent by the author. It never received a reply.
48. See Personal Investment Authority Ombudsman Bureau Annual Report 1995-1996, atp. 5.
49. Insurance Ombudsman Bureau Annual Report 1994, at p. 4.
50. Financial Services and Markets Act 2000 ss. 228 (2) and 229 (2).
51. S. 229 (3). The author did point this out in correspondence but received a completely incoherent reply from the Treasury.
52. Kuddus v. Chief Constable of Leicestershire Constabulary, House of Lords, [2001] UKHL 29, per Lord Millett.
53. Westdeutsche Landesbank Girozentrale v. Islington BC [1996] AC 669.
54. This is discussed in more detail by A Samuel, "Consumer Financial Services Law", in: International Tracing of Assets, Vol. 1 (T. M. Ashe and B. Rider [eds.]) (FT Law & Tax 2001) B2.
55. Personal Investment Authority Ombudsman Bureau Annual Report 1998-1999, at pp. 21-26
56. Personal Investment Authority Ombudsman Bureau Annual Report 1999-2000, at pp. 10-13.
57. Original Terms of Reference, at para. 32.
58. A briefing note for firms: complaints about mortgage endowments (2000)
59. Mortgage Endowment Complaint Assessment Guide (2001).
60. National Grid Co pic v. Mayes [2001] 1 WLR 864.
61. Mortgage Code, para. 94.
62. FSA Press Release, 28 November 2001.
63. FSA Press Release 18 January for United Friendly' s £ 700,000 fine mentioned that the firm had failed to ensure that customers' complaints had been promptly and adequately investigated
64. A letter from the FSA 4 April 2002 to a significant number of life assurers expressed concern about the quality of endowment complaint handling. Ombudsman News February 2002, at p. 3.
65. Sun Life of Canada v. Jervis [1943] 2 All ER 425.
66. Carter v. Boehm (1766) 3 Burr 1905, 97 ER 1162, affirmed in Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co [1995] 1 AC 501.
67. Banque Financiere de la Cite SA v. Westgate Insurance Co [1991] 2 AC 249. In the LAUTRO Code of Conduct, Schedule 2 to the LAUTRO Rules, these were covered respectively in paras. 12, 6 and 8.
68. See the Ombudsman's approach to agency law relations in the Insurance Ombudsman Bureau Annual Report 1989, at pp.7 and 17.
69. Personal Investment Authority Ombudsman Bureau Annual Reports 1995-1996, at pp. 44-45
70. Personal Investment Authority Ombudsman Bureau Annual Reports 1998-1999, at p. 34
71. LAUTRO Enforcement Bulletins 5, para. 3.01-3 was repeated in Enforcement Bulletin 13, paras. 2.08-10.
72. FMBRA Briefing 6 from October 1991, at p. 4; LAUTRO Enforcement Bulletin 14.
73. Glaister v. Greenwood [2001] Lloyd's Rep. P.N. 412.
74. SIB Pension Transfers and Opt Outs: Review of Past Business, Parts I and II were issued in March and October 1994. For the historical summary, see FSA and PIA, "Pension transfers and opt outs review: phase 2", Consultation Paper 7, at p. 3.
75. PIA, Transfers Guidance for Review of Past Business 1995, at p. 18 and Regu latory Update 28, at p. 7.
76. PIA, Pension Opt-Outs and Non-Joiners: Guidance for Review of Past Business 1995, at pp. 22-23, describes this process of prioritisation. PIA, Pension Opt-Outs and Non-Joiners: Guidance for Review of Past Business 1995, at pp. 26-27.
77. See SIB Pensions Transfers and Opt Outs Review of Past Business, Part II: Specification of Standards and Procedures, at p. 80 PIA Regulatory Update 46, at p. 5 on customers who contributed more and less to the personal pension than the minimum contribution to the occupational scheme (the under-contribution rule is inconsistent with R. v. ICS ex p Bowden [1995] 1 WLR 157) - PIA Opt-Outs and Non- Joiners Guidance 1995, at p.78 and B-2: Transfers: Guidance for Review of Past Business, PIA, July 1995, at p 67, and B-3 and C-3 on the effects of replacement policies is inconsistent with the House of Lords decision in Parry v. Cleaver [1970] AC 1 & Needier Financial Services v. Taber [2002] Lloyd's Rep. P.N. 32; FSA Pensions Review Bulletin 1 on change of employment; FSA Pensions Review Bulletin 14 on valuing benefits where the customer has subsequently transferred his policy; PIA Regulatory Update 46, at p. 4 on compensation for opt-outs and non-joiners of money purchase schemes.
78. PIA, Pension Opt-Outs and Non-Joiners: Guidance for Review of Past Business 1995, at pp. 75-85.
79. PIA, Redress Assessment: Guidance for Review of Past Business 1995, at pp. 8-9.
80. FSA Pensions Review Bulletin 1.
81. PIAOB Annual Report 1998-1999, at pp. 29-30.
82. PIA, Redress Assessment: Guidance for Review of Past Business 1995, at pp. 8-12.
83. FSA Pensions Review Bulletins 2 and 4, on under-contributions. R. v. SIB exp IFAA [1995] BCLC 76.
84. Cocking v. Prudential [1996] CLC 692.
85. Gorham v. British Telecommunications [2000] 1 WLR 2129.
86. J Rothschild Assurance v. Collyear [1998] 1 CLC 697. Lloyds-TSB General Insurance Holdings Ltd v. Lloyd's Bank Group Insurance Co Ltd [2002] Lloyd's Rep. IR 211.
87. Needier Financial Services v. Taber [2002] Lloyd's Rep. P.N. 32.
88. Regulatory Update 33, at p. 6.
89. Personal Investment Authority Ombudsman Bureau, Terms of Reference, para. 7.
90. PIA, Pension Opt-Outs and Non-Joiners: Guidance for Review of Past Business 1995, at p. 4.
91. Financial Services Authority, "The treatment of windfall benefits for the personal pensions review, the FSAVC review and mortgage endowment complaints", Consultative Paper 126, 2002.3 News from the Ombudsman Bureau 4, 2 (1999).
92. PIA, Pension Opt-Outs and Non-Joiners: Guidance for Review of Past Business 1995, at p.13.
93. PIA, Pension Opt-Outs and Non-Joiners: Guidance for Review of Past Business 1995, at p. 25.
94. PIA, Pension Opt-Outs and Non-Joiners: Guidance for Review of Past Business 1995, at p. 25.
95. FSA Pensions Review Bulletin 3. Investors who were under 30 at the point of sale did not, though, receive full mailing for any rebate-only policy under the Phase 2 Guidance. See PIA Regulatory Update 33, at p. 8.
96. This is reflected in Regulatory Update 33, issued in May 1997. Daily Telegraph 26 March 1998.
97. See the shortcuts provided for in RU 46 for money-purchase scheme opt-outs. See FSA, Pension transfers and opt outs review phase 2: Policy Statement, August 1998. This can best be seen from the changes in financial assumptions issued by the PIA and now the FSA on a regular basis.
98. See PIA, The Pensions Review: Recalculating loss (and redress) for Phase 2 Transfers - SERPS Adjustment, Guidance, November 2001.
99. Para. 5.2A. See the Personal Investment Authority Ombudsman Bureau Annual Report 1995-1996, at p. 37. The report for 1999-2000 contained the defective original draft.
100. Financial Services Authority, Free-standing Voluntary Contributions, Consultation Paper 27. This sets out the background material to the review. I2K Financial Services Authority FSAVC Review Model Guidance 2000. FSA FSA VC Review Bulletin 4, at p. 3. m Financial Services Authority FSAVC Review Model Guidance 2000, at 3.2.17, amended by FSA FSAVC Review Bulletin 2, at p. 2.
101. Financial Services Authority FSAVC Review Model Guidance 2000, at pp. 46-47.
102. See, for example, FSA FSAVC Review Bulletin 4, at p. 3.
103. IM FSA FSA VC Review Bulletin 4, at p. 3.
104. For example, FSA FSAVC Review Bulletin 5, at p. 7.
105. Personal Investment Authority Regulatory Update 72, at p. 2.
106. Personal Investment Authority Regulatory Update 75, at pp 3-4.
107. PIA, Fifth Survey of the Persistency of Life and Pensions Policies, October 1999, at p. 18.
108. Endowments: FSA letter to Consumers' Association, 5 June 2002 summarises the regulator's position. m Financial Services Authority Annual Report 2001-2002, at p. 38, estimates that £9 billion in compensation has already been paid.
109. Unpublished, dated 4 April 2002.
110. Endowments: FSA letter to Consumers' Association, 5 June 2002 u2 P Cane, Tort Law and Economic Interests, 2nd ed. (Oxford: Clarendon 1996) at pp. 409-410.
111. Financial Services Authority Annual Report 2001-2002, at p. 38, Estimates that £ 9 billion in compensation have already been paid. The figure is currently estimated to be closer to £13 billion.