Health and protection insurance complaints to the Financial Ombudsman Service (FOS) increased by almost 20% for the third quarter of the 2024 financial year – compared to the same period last year.
Private medical and dental insurance and income protection were the product areas driving the increase with 33% and 39% more cases respectively.
Overall, there were 1,127 complaints across five types of health and protection insurance – private medical and dental insurance, critical illness cover, life and critical illness, term assurance, and income protection, from 1 October to 31 December, according to new figures published by the regulator.
That compared to a total of 950 new complaints for the same period in 2023.
This meant an overall increase for health and protection insurance of about 177 new complaints for this period, representing an increase of about 18.6% over the same period last year.
The largest number of complaints and highest increase was for medical insurance private medical and dental insurance with grievances rising by a third.
This product area saw 548 new complaints for the period, with an uphold rate of 25%. For the same period last year, there were 410 new complaints, but with an uphold rate of 29%.
Income protection saw a 39% increase in cases with 201 new complaints, with an uphold rate of 23%. For the same period last year, income protection saw significantly less new complaints at 145, with a similar uphold rate of 21%.
Term assurance complaints fell 11% to 209 new complaints, with an uphold rate of 22%. That compared to 236 new complaints for the same period last year, with an uphold rate of 18%.
Critical illness cover saw 148 new complaints to the FOS – with an uphold rate of 21%. That was about equal to the same period last year, where there were 149 new complaints – but with an uphold rate of only 15%.
Life and critical illness cover saw 21 complaints an increase over the less than 10 such complaints during the same period last year.
Total complaints
However, the health and protection insurance sector remains a very small element of the FOS caseload as the regulator received 40% more cases with 68,430 complaints between October and December 2024 compared to a year earlier.
Although that was a slight drop on the 73,692 complaints reported in the second quarter of this financial year, complaint volumes in the current financial year remain significantly higher than in 2023-24.
Across all financial products and complaint issues the latest data set shows the Financial Ombudsman Service upheld 34% of all resolved complaints in the consumers’ favour, which is in line with the previous quarter. It was 35% in the same three-month period in 2023.
However, for cases brought by professional representatives, the uphold rate is 26% in the latest data set, compared to 36% for cases brought directly by consumers.
But the FOS said complaints about current accounts and credit cards continued to be at a high level.
The most complained about product for the quarter was hire purchase (motor) which increased due to complaints about motor finance commission arrangements, following Court of Appeal judgments against some lenders.
The ruling has prompted warnings that it could “drive a coach and horses” through commission payments across financial services, including the health and protection insurance markets.
New charges
Health & Protection reported last month that the FOS had confirmed would proceed with a proposal to charge claims management companies (CMCs) and other professional representatives £250 to refer a case to its service as of 1 April 2025.
They will receive £175 back in credit if the complaint is found in favour of the consumer they represent, reducing the charge they pay to £75.
Professional representatives will be able to bring 10 cases to the service for free each financial year.
After that, every subsequent case they refer will be chargeable. However, the FOS will remain free to families and friends, charities and voluntary organisations who may be helping people with their complaint.
High levels of complaints
The FOS said it was continuing to receive high levels of complaints from consumers and small businesses following the current increase.
In the 2023/24 financial year, the FOS reported that it had received 47,868 in the third quarter and 46,716 new cases in the second quarter (July to September).
The FOS said that high levels of cases, particularly around mass redress issues such as motor finance commission arrangements, was one of the reasons it recently conducted a joint Call for Input with the Financial Conduct Authority (FCA) – seeking ways to modernise the redress framework to ensure it is fit for the future.
It has also witnessed significant turnover at the top of the organisation as CEO and chief ombudsman Abbie Thomas left in February, with chairwoman Baroness Manzoor announcing her departure a week later.
James Dipple-Johnstone, interim chief ombudsman of the FOS, said: “Every year we help resolve tens of thousands of difficult disputes for consumers and businesses – providing impartial help in often challenging circumstances.
“We are continuing to see high volumes of motor finance commission cases and would encourage businesses to consider whether complaints are covered by the FCA’s temporary complaint handling rules.
“Ongoing legal proceedings are impacting our ability to issue final decisions in these cases, but we are putting steps in place to ensure we can resolve them as quickly as possible when we have the clarity we need.”
New technologies
The FOS said that while the current redress framework works well for individual complaints about specific issues, sudden and significant increases in complaints can cause firms to struggle to effectively respond, delaying any customer compensation that is due.
To improve the service provided to both consumers and businesses, the FOS said it is in the process of delivering a significant transformation programme – investing in new technologies, opening new team locations, and introducing new ways of working.
It said these changes will make the organisation more resilient to significant variations in demand.