banking and finance supplement

NO COPYING WITHOUT BSI PERMISSION EXCEPT AS PERMITTED BY COPYRIGHT LAW

Banking and Finance Supplement

to the Complaints Management

Specification CMSAS 86:2000

BSI Management Systems


© BSI 07-2003 2

Contents

Part A Introduction and background

Section 1 About this supplement 3

Section 2 Why complaint management is important 3

Section 3 How we know what’s actually going on 4

Section 4 The good practice checklist 5

Part B Managing complaints

Section 5 Openness to hearing about dissatisfaction 6

Section 6 Clear complaints policy and processes 8

Section 7 Skilled and motivated complaint management staff 10

Section 8 Elements of the process that affect all complaints 12

Section 9 Special factors affecting complaints from consumers 14

Section 10 Special factors affecting complaints from or via intermediaries 16

Section 11 Complaint escalation and the interface with regulatory bodies 18

Section 12 Gaining business benefit from complaints 20

Section 13 Understanding the customer experience of complaints 22


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PART A – INTRODUCTION AND BACKGROUND

1 About this supplement

This supplement is designed to help Banking and Financial Services organisations get the most out of the BSI Complaints Management Specification (86:2000). The Specification to which it refers sets standards for a complaint management system within any organisation against which an audit can be carried out to confirm that required standards are being met. However, the Specification is generic in terms of the type of business. This supplement and others in this series help interpret the Specification and its requirements for individual business sectors. It must be emphasized that this supplement only guides you to a Banking and Financial Services interpretation of the Complaint Management Specification. In order to achieve registration against the Specification it will be necessary to convince yourself and the auditor that all the requirements of the actual Specification have been met. It is also important that each organisation develops its own complaint processes, standards and systems. This supplement shares some good practices that other organisations are employing both within the Financial Services sector and outside it, but you must take this as input to your own techniques, not as a blueprint solution. Having said all of the above we are convinced that this supplement provides high value support in planning and implementing your own complaint management activity and unlocking some of the many competitive advantages and business benefits available to organisations that manage complaints well. 2 Why complaint management is important Complaints are often seen as negative. How wrong can this be? Leading organisations are increasingly realising that a complaint is often a real expression of a desire to remain as a customer of your organisation despite the fact that something is wrong. Customers may not even call their enquiry a complaint and some organisations use terms other than ‘complaint’ to describe expressions of customer dissatisfaction. The principles are the same and no degree of clever wording can disguise the need to deal with customer dissatisfaction positively and effectively. It is true that in financial services customers may be committed to a policy or a contract on some occasions, thereby making it difficult to transfer that piece of business elsewhere. But what about all their other financial business and what about their renewal. Customers have long memories for bad experiences and good experiences. What they quickly forget is mediocrity. The risk of losing a customer’s whole portfolio because of a poorly handled complaint relating to just one of their products is high. Effective complaint management does a number of things for your organisation: � It reduces the ‘Reputational Risk’ associated with publicity around badly handled complaints � It improves customer confidence, satisfaction and ultimately loyalty � It improves employee satisfaction as they can do the good job for customers that they want to do Section 12 of this supplement looks specifically at how you can realise business benefits through effective complaint management. Carry out a search on the word ‘complaints’ on the Internet and you will get an idea of the breadth of coverage of the subject: from statistics; to computer systems; customer forums to people setting up websites just to complain about a single company.


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0 10 20 30 40 50 60

Insurance

Other financial services

Banks

Building societies

Travel and distribution

Other sectors

Publishing and media

M otor

Retail

Telecoms

Techno logy

Energy

Regulatory bodies are also becoming more focussed on complaints and how they are handled. The April 2003 FSA Handbook has a very substantial section on complaints. (Available at www.fsa.gov.uk/vhb/html/disp/DISPtoc.html ). This reflects the requirement, within the financial services industry, for ALL SIGNIFICANT COMPLAINTS to be reported to the FSA. There is not just a single regulator in the financial services sector. The General Insurance Standards Council (GISC) has specific complaint management guidance for the insurance industry. The regulatory framework is not static either. There will be changes in the framework over the forthcoming months and years that affect the way that complaints are managed and escalated. In addition, other standards bodies and quality registration organisations such as ISO, EFQM and Baldrige are taking complaint management very seriously when considering how well organisations are dealing with their customers. Even with all this regulation the standards set by the financial services industry bodies can only be considered as minimum standards. To provide a best-in-breed complaint management capability and to use it as a competitive advantage organisations need to do far more that the minimum.

3 How we know what’s actually going on One of the elements of this supplement is to share with you the degree of effort that the Financial Services industry is putting into dealing with complaints. We can do this using information provided by QCi Assessment Ltd. from their CMATTM (Customer Management Assessment Tool) approach. This assessment and benchmarking approach has been used by over 600 organisations globally to understand how they are currently managing their customers compared to best practise. It focuses on the delivered reality of people, process, systems and practices rather than management plans and intention. It provides a unique insight to what’s really happening. The assessment is against a wide model of customer management and a wide mix of company types. The statistics we use in the remaining sections of this supplement are taken just from the section called ‘Managing Dissatisfaction’ and just from Financial Services companies. To put this in context the overall scores for Managing Dissatisfaction (where 100% is best practice) for the various Financial Service sectors are shown here against other sectors.


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4 The good practice checklist

Each section of this supplement proposes good practices that can be adopted to deliver excellent complaint management as well as give the best possible chance of meeting the requirements of the specification. Not all of the proposed practices will be relevant in all situations but together they form a good start point for the set of practices that you need in place.

In order to assess where your organisation is against these practices you can use each section in this supplement. In addition, you can use a new, free, on-line service launched by BSI in conjunction with the supplement. This service has been developed in conjunction with QCi Assessment Ltd who own the CMATTM service explained in section 3. The service is easy to

use and provides a quantitative indication of how well your organisation is currently delivering the good practices identified in this supplement. The service can be used as many times as you like, for different business units within your organisation. It is accessible at www.cmat.biz/bsifinancial


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PART B – MANAGING COMPLAINTS 5 Openness to hearing about dissatisfaction It is of course true that some complaints are not justified and are from customers simply looking for some form of compensation. But most customers simply want the problem quickly resolved and research has clearly shown that less than 15% of complaining customer want any form of financial remedy. More worryingly, many customers cannot be bothered to complain and most will be reluctant to use a formal or official process. A customer who takes the time to complain and is confident that the recipient will take note and listen is a customer who wants to be loyal. An organisation with a high level of complaints might be open and responsive to customers rather than having a high level of customer dissatisfaction. A complaint that is escalated to senior people in the company, solicitors or even to the Financial Ombudsman is time consuming and may not be constructive. Escalation is often a result of a less than ‘open’ reaction to the complaint lower down the organisation and earlier in the process. One household name organisation changed its whole philosophy on complaint management. Instead of targeting regions on reducing the number of complaints each quarter, it changed to targeting an increase in the level of complaints. The number of complaints nearly doubled but customer satisfaction increased substantially as customers realised that their complaints were being dealt with effectively. Complaint Management Specification requirements Your complaint management philosophy should be open and encourage customers to complain when things go wrong, or are not up to a customer’s expectations. Your organisation needs a culture of ‘accepting responsibility’ and ‘getting things right’. Your complaint process should be visible to customers who should be able to complain in person, by phone, in writing, by email or any other contact method they prefer to use. A well-known Insurance organisation changed its strategy of not publishing complaint office phone numbers on its Internet site. It now actually presents a guide of how to complain on its website with a choice of registering complaints electronically of by phoning a special phone number. You need to widely publicise information about how to complain in places such as:

- Retail outlets and offices - Renewal notifications - Product literature

- Right-to-cancel notices - Web sites

Also, subject to regulatory requirements around contractual language, you will need to provide help to customers with limited literacy skills and those requiring support in languages other than the normal operating language of your organisation. This might be achieved by directing them to organisations that can help them to complain.

0

50

100

150

200

Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002

Complaints Satisfaction


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Good practice checklist � Look for indicators of dissatisfaction before complaints occur and pre-empt them. Examples are

early settlement enquiries or requests for the name of the Chief Executive. � Encourage an ‘open and responsive’ attitude to complaints when they occur. A retail bank employed a senior manager from a manufacturing company where reporting complaints was seen very positively and was compared to reporting a ‘near-miss incident’ which could prevent a serious accident in the future. He introduced the same concept to the bank with complaints being seen as the first step in preventing a customer from defecting. � Have a clear and wide definition of a complaint so that all staff know when to deal with customer

contact using your complaint management process. � Use consumer ‘education’ practices to reduce the number of unjustified complaints. A utility company analysed the ‘root cause’ of over 50,000 complaints. Less than 30% were due to a physical service failure or product shortcoming. More than 70% were due to a mismatch between what consumers thought they were buying into and what they actually got. After further analysis half of this misunderstanding was due the customer-facing staff (including sales people) not being clear on what the organisation was promising to consumers. � Provide easy access to your complaints process - on every contact method you use to deal with

customers and prospects. A bank carried out an analysis of how comprehensive its complaint process was. It found that for each complaint that went through its formal head office complaint management process it could identify 28 indicators of dissatisfaction in its day-to-day dealings with customers. Half of these had been identified at branch level but half had not been communicated to the organisation at all by the customers. � Provide support in operating the complaints process to customers with limited literacy skills or

limited language capability. � Introduce targeting and reporting that encourages staff to record all complaints as a positive

means of improving customer service How financial service organisations are doing � 70% of Financial Service Organisations have senior management who demonstrate that complaint

management is a critical business process. � Only 38% can clearly demonstrate that they actively publish telephone numbers to use for

complaining. Measures for success The following can be good indicators of the openness of your complaint management: � Total number of complaints compared to overall customer satisfaction level – If satisfaction is

dropping but complaints are not increasing there is probably a problem with the complaint management process.

� Number of defecting customers who didn’t complain before leaving – If customers defect without even complaining then they probably have little faith in the complaint process.

� Number of complaints that are about the complaint process itself – As many as 70% of complaints can actually be due to frustration with not getting an earlier complaint dealt with.

� Poor attitude of staff towards the complaints process in staff attitude research – Staff can often provide a more candid view of the organisation than simple process measures.

� Proportion of complaints made to regulatory bodies where the organisation was not previously aware of the issue – If customers bypass an organisation and go straight to a regulator they probably have little faith in the vendor.


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6 Clear complaints policy and processes Customers and staff want a complaints policy that is visible, clear and easy to use. Complaint management is one of those business areas where policy and processes absolutely need to be clearly documented and communicated. Informal policies and variable processes often cause more complaints than they help resolve. Even in organisations where the management style is more ‘free-flowing’ it is critical to have a high degree of formality and control around complaints. Complaints Management Specification Requirements You should have a documented complaints policy that is endorsed by senior management and is available to all staff, even those who do not deal directly with customers. It needs to be made available by means that are appropriate to the organisation and the staff. So it is not sufficient to simply make a hard-copy version of the policy available at head office. The policy should, for example, be available in the company intranet or emailed to all people on the email system. The complaints policy should clarify:

- What type of contact is considered a complaint - The key points in the complaints management process - The relationship with legal requirements and regulatory bodies such as the FSA - The relationship with quality and service delivery objectives - The roles and responsibilities of all staff with respect to complaint management

It is also critical that the complaints policy and process documentation are kept fully up-to-date. Updates should take into account a wide range of input including customer research, staff input, input from intermediaries and comments and feedback from regulatory bodies. Clear targets for complain resolution timescales should be put in place covering the various stages of the complaint process (Acknowledgement, Initial Response, Final resolution etc.) Audits of the complaint process should be carried out periodically by staff who are as independent as possible from the activity that is being audited. The audits should provide information on whether the complaints management system fulfils the stated policy aims and that the system has been implemented effectively. Management should also monitor complaint management performance on an ongoing basis to identify areas of the business that could be improved. Monitoring can include:

- Levels of customer satisfaction at how complaints were handled - How well the complaints management system meets it targets - Whether repeat problems are being identified and corrected

Good practice checklist � Formally document your complaints policy. � Ensure that all cross-border considerations are identified and considered in your complaint

management policy. � Make sure that there is explicit and visible senior management endorsement of the complaint

policy and processes. A retailer requires all store managers personally to handle at least 10% of customer complaints, including contacting the customers. Store managers also spend at least one day a year dealing with complaints in the central customer service office.


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� Document your complaint management processes in a way that assists in communication to staff and intermediaries.

� Make sure that every member of staff has easy access to the complaints policy and processes in a way that suits their location and way of working.

� Have a customer-facing version of your complaint policy that is offered to customers at an early stage of complaint.

� Seek input from internal staff and intermediaries on the operation of complaint processes and how these can be improved.

� Seek feedback from regulatory bodies involved in the escalation of customer complaints on how your policy and processes are operating.

� Make sure that the complaints policy sure that your complaints policy and processes are regularly reviewed and updated.

� Carry out periodic audits of your complaint management process using resources that are as independent as possible.

How financial service organisations are doing � Only 30% of Financial Service organisations have a completely clear definition of what constitutes

a complaint. � Less than 25% report progress back to complaining customers during the process of dealing with

the complaint. Measures for success The following can be good indicators of how clear your complaint policy and processes are: � The number of complaints that are about the complaints process itself or that are escalated (in

particular to an Ombudsman) because of failures in the complaints process � The level of ideas for improvement received from staff, intermediaries and regulators � The level of senior management involvement in the review of complaints policies and of

complaints management performance � The average length of time between updates to the policy and processes


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7 Skilled and motivated complaint management staff A clear policy and effective processes are a pre-requisite for good complaint management but these are of very limited use if the staff that operate them do so half-heartedly or without the skills they need. The vast majority of your staff will want to do a good job for customers and will particularly want to help customers who are dissatisfied. They need training and they need the support of the organisation in dealing with complaints. Complaint Management is a specialised business discipline and is not something that can be staffed by people without a certain character and mind-set. The chances of dealing with customer complaints effectively is greatly reduced if the main complaint management teams are dissatisfied with their roles and do not feel valued by the organisation. The management of the whole dissatisfaction process is also a specialist role that needs a customer service professional as opposed to just being part of a larger and more general role. Outsourcing of the complaint handling process to a call centre or other type of organisation does not remove the responsibility from your organisation, only the resourcing. An outsourced complaint management facility requires the organisation to be just as demanding of the staff recruitment, training and motivation as for an in-house resource. Customers will not make allowances. Complaints Management Specification Requirements All staff, even if they are not normally customer interfacing, should have a basic knowledge of the complaint management policy and processes within the organisation. They should at least be able to direct a customer into the complaint management process or preferably be able to deal with basic complaints themselves. Staff who deal with complaints as their main role should be given suitable training for the type and level of complaints being dealt with. The organisation must be able to demonstrate that its complaint processes are fair to staff. An organisation discovered, during a review of the complaints procedure, that staff did not feel that the system was fair to them. Staff believed that having a complaint made against them was made worse if it appeared to be handled unfairly. A number of changes were made to increase openness and provide support for staff. Staff should be given clear guidance on the conditions under which they can or should break off discussions with a person who is complaining. This will typically result in some form of escalation. All complaint management staff should be able to input to the development and improvement of the organisation’s complaint management policy and processes. The organisation must also be able to show that it has allocated an appropriate level or resources to complaints management. Good practice checklist � Recognise that complaint management is not the same as compliance. � Encourage a clear “no-blame culture” that encourages staff to see complaints as positive - and not

hide them for fear that they will reflect badly on them as individuals. � Make sure that all staff know the names of the Chief Executive and the Customer Service Director

(or equivalent). � Have clear resourcing assumptions in place that enable accurate calculation of the relevant level

of complaint management resource that is required.


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� Have flexible resourcing for complaint management so that peaks in complaints can be handled without deterioration in service.

� Set and communicate a clear limit of responsibility for all staff in terms with the type and nature of complaint with which they should be expected to deal.

� Provide relevant, high quality training to people who are likely to receive or deal with customer complaints.

� Make full use of coaching and mentoring techniques using the skills and experience of successful complaint management staff as well as supervisors and managers.

� Disseminate information about complaints performance across the organisation and discuss with staff.

How financial service organisations are doing � Only 16% of financial service organisations have a real ‘no-blame’ culture that encourages staff to

look upon complaints as positive. � Less than 30% have formal and specialist complaint management training in place. � 26% are actively using coaching and mentoring as well as formal training. Measures for success The following can be good indicators of how skilled and motivated your staff are: � The proportion of staff and intermediaries who have seen and understood the complaint policy and

processes for complaints management. � The amount of resource allocated to staff development in the area of complaints management. � Turnover on complaint management staff. � Number of customer complaints about the complaint management process itself. � Staff research results regarding their training and motivation in handling complaints.


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8 Elements of the process that affect all complaints The complaints management process needs to be capable of handling complaints from all categories of customers (and potential customers) through all available channels. In financial services this will include branches and, importantly, intermediaries such as brokers and independent financial advisors. You should apply consistent standards across all areas of the business and make sure that intermediaries understand how to apply these standards in their dealings with customers. Because complaints management is primarily about retaining and satisfying good customers, the process needs to give customers confidence that they will be treated fairly and honestly. When a customer complains their expectations can easily decay into disappointment if they are not treated well. They then become at risk of defecting, which can seriously damage an organisation’s financial performance. Effective complaints management systems need the appropriate people skills and not just the right processes. A no-blame culture is critical as staff need to be confident that that the complaint they handle will be taken seriously, that it will not swept under the carpet and that they will receive recognition for their contribution. Complaints Management Specification Requirements Your organisation should make a demonstrable commitment to fairness in all complaint handling activity. The principle of fairness should be clearly specified in the complaints management policy and be put at the heart of the process, including those that apply to intermediaries. All efforts should be made to have a process that deals with as many complaints as necessary at the first point of contact. Where this is not possible the organisation should co-ordinate the inputs of the various internal or supply chain groups into a single response to the customer. Customers should be given timescales for the resolution of their complaint and kept informed, by an appropriate method, of the progress of their complaint. They should also be given a contact name if they wish to check on progress. You should cater for the particular nature of complaints relating to cross-border transactions. This can be particularly important in the financial services sector, and is also relevant to dealings through intermediaries. You should not receive any revenue from complaints, for example by customers having to use a premium rate telephone service. Good practice checklist � Record all complaints, irrespective of where they are received into the organisation. � Develop a simple but comprehensive coding system for use in recording and analysing

complaints. � Empower staff to provide on-the-spot resolution of complaints in as many cases as possible. A well-known credit card company introduced a scheme to empower staff to deal with complaints at the first point of contact. They set themselves an ‘FFC’ target (Fixed at First Contact) which was met and they estimated that total cost of complaint handling reduced by over 15%. � Allocate a complaint co-ordinator to all complaints and communicate this is to the person

complaining. � Give the person complaining a timescale within which they will receive a response. � If the period taken to deal with a complaint is extended then provide progress reports via an

appropriate medium.


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� Make sure that only a single response on the complaint goes back to the customer irrespective of the number of internal groups or supply chain organisations that are involved.

� Audit responses to complaints to ensure clear language and obvious fairness. � Make sure that complaints management standards are applied equally across all parts of the

organisation, including intermediaries. � Check back once a complaint is closed to ensure that the person who made the complaint also

thinks it is closed. How financial service companies are doing � 30% of Financial Service Organisations now formally allocate a named co-ordinator for all

complaints and communicate this to the complaining customer. � 40% of Financial Service Organisations provide complaining customers with a formal timescale

within which their complaint will be dealt. Measures for success The following can be good indicators of how well your overall complaint management is performing: � The overall number of complaints received. � The proportion of complaints resolved at the first contact.

Resolving an enquiry at the first stage reduces the cost by 50% � Average number of customer contacts during a complaint. � Average time to close a complaint. � Proportion of complaints where the person complaining was satisfied with the way they were

handled. � Total number of training days on complaint management.


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9 Special factors affecting complaints direct from consumers There are five things that can typically happen when a customer is unhappy.

- They can suffer in silence - They can defect in silence - They can tell other people about their dissatisfaction - They can go public about their experience, by writing to newspaper, consumer programmes

or, increasingly frequently now, posting negative comments on websites - They can communicate their unhappiness to the organisation

The final action is the only positive one – giving the organisation an opportunity to put things right and learn for future improvement. And yet only about 4% of customers complain. But where an unhappy customer is likely to tell 10 other people, a loyal and satisfied one may only tell 2. A lost customer also costs more to win back than retaining an existing customer who may be unhappy. 90% of dissatisfied customers who defect say that they will never come back. And yet 90% of customers whose complaints have been handled effectively will not defect. Complaints Management Specification Requirements Customers should not have to produce inessential documentation to support a complaint. Your procedure should aim to collect standardised information, either in a pre-printed form, on-line form or contact centre script, that:

- Is easy to complete, in plain language, and jargon free A building society improved satisfaction with complaint handling from 45% to 66% after implementing a plain language training programme for complaint handling staff.

- Allows for personalised input from the customer - Covers the information needed to support the organisation’s complaints management

system You should keep detailed information about customers and their complaints but these should be kept confidential as appropriate. Customer data needs to be protected. You should have procedures in place to allow the exchange of information between departments or partner organisations, so that customers do not have to make a number of separate enquiries/complaints. Good practice checklist � Flag all customers who have current complaints on the customer database so that this is apparent

to any person from the organisation who is dealing with that customer. A large retail bank integrated its various systems that held customer data through a web-based front-end that was available through a range of contact channels. The front screen was able to bring together in a single view all the customer interactions, including complaints. The system has helped to make all customer interactions more personal and higher value.

� Ensure that staff who are dealing with enquiries have access to as much information as possible

about customers, including information on their value and importance to the organisation. � Offer a base standard of courtesy, acknowledgement and response to all customers, irrespective

of their value to the company. � Develop Intensive care strategies that can be deployed for particularly valuable or important

customers when a complaint is received.


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� Make sure that customer information is handled sensitively and kept confidential. � Investigate the root causes of all complaints and take effective action to prevent re-occurrence

rather than simply applying quick fixes. � Where relevant and appropriate give customers the opportunity to meet or at least talk to the staff

member handling the complaint. How financial service companies are doing � Less than 10% have any mechanism in place to reliably record the fact that a customer is in the

process of having a complaint dealt with so that the rest of the organisation can see this in any dealings with the customer.

� Less than 5% consistently check back with complaining customers that they are satisfied with the way their complaint was handled.

� Around 25% carry out analysis of the root causes of complaints and feed this into product development or business process change.

Measures for success The following can be good indicators of how well your complaint management is performing with respect to complaints from end customers: � Proportion of complaints flagged on the customer database. � Number of intensive care strategies triggered. � Number of ‘thank-you’ communications from customers regarding the complaint process � Number of root cause issues identified.


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10 Special factors affecting complaints from or via intermediaries Many customers deal with intermediaries (brokers, independent financial advisors) to access or buy financial services. In fact customers often do not know or even care whether they are dealing with an intermediary or the actual finance provider. They are still dependent on the end provider for service quality and customer experience. Any failures or breakdowns will have a negative impact on both the intermediary and the financial services organisation. Financial services providers must make sure that complaints management systems encompass dealings through intermediaries, or risk damage to their brand image and market position. When an intermediary highlights a problem with a financial services provider, it is either:

- Already a customer problem that they cannot solve - It is going to become a customer problem if it is not corrected, or - It is going to become the organisation’s problem if it causes the intermediary to transfer

business away from you The relationship between the organisation, the intermediary and the consumer is not always simple in the financial services industry. It can be affected by whole different sets of law; those of agency and of contract. This can mean that great care is required in understanding the nature and relationships involved in a complaint from, via or about an intermediary. The complaint management standards for intermediaries must at least be consistent with those that they have for consumers and preferably be complementary and supportive. Complaints Management Specification Requirements Your policy and key processes will need to be common for consumers and intermediaries, with additional features developed as necessary. The principles of accessibility, fairness and honesty will need to be preserved. Escalation procedures and the interface with regulatory bodies will also need to be particularly robust. You should also make sure that your complaint management audit and review processes include complaints that originate from or are handled by intermediaries. Good practice checklist � Make sure that complaints management policy and processes explicitly extend to the intermediary

network. � Get formal acceptance from all intermediaries that they are prepared to share in the basic ethos

and principles of the organisation’s complaints management approach. � Wherever possible and relevant, put in place service level agreements between providers and

intermediaries with respect to complaint management. � Check that each intermediary has a detailed complaint process in place that is consistent with that

of the provider’s organisation. � Document the points at which complaints should be escalated from the intermediaries complaint

management system to that of the provider even if the person complaining has not specifically asked for this.

� Provide intermediaries with access to complaint management processes that enable them to bypass call queues if they are face-to-face with a customer.

� Provide intermediaries with a named contact within the organisation for dealing with complaints and customer problems.

� Make sure that the intermediary has a specific senior person with responsibility for dealing with customer complaints.

� Put in place mechanisms to ensure that information regarding complaints can be efficiently exchanged between intermediaries and providers.

� Provide feedback to intermediaries on the outcome and learning from any complaints that they pass on to the provider.


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How financial services companies are doing � 20% have comprehensive measures frameworks in place and agreed with their intermediaries.

Most of these include a complaint reporting element. � 35% feel that they get full and open co-operation on complaint management from all of their

channels, including intermediaries. � The Financial Services industry is not known for managing its intermediaries as channel partners

in the same way as other industries. This is emphasized by the fact that none of Financial Service Companies on the CMATTM benchmark database had any form of ‘intensive care’ strategy in place for complaining intermediaries.

Measures for success The following can be good indicators of how well your complaint management is performing with respect to complaints from and via intermediaries: � Number of complaints from intermediaries � Number of complaints via intermediaries from customers � Number of complaints received direct from customers about Intermediaries � Customer satisfaction figures from intermediaries � Customer retention and recruitment figures from existing or potential intermediaries


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11 Complaint escalation and the interface with regulatory bodies Escalation of complaints can either be through the organisation’s own complaints management system or to an external adjudicator such as the Financial Ombudsman Service. In some cases, a customer may go straight to the Ombudsman. This section covers both internal and external escalation of complaints. You should aim to deal with as many complaints as possible at the first level of contact but some cases will need to be handled at a higher level. The staff member handling a complaint might not have the knowledge or authority to take action, because the customer does not accept the proposed resolution or because the complaint has broader implications that require senior level review. In whatever case, the organisation needs to have in place clear and effective escalation procedures that are communicated to all staff and that are regularly reviewed as part of the general reviews of complaints management. The interface with regulatory and adjudicating bodies is very important in financial services, especially as it concerns areas like consumer protection. But the FOS, Pensions Ombudsman and other adjudicators only regulate certain types and areas of the financial services business so it is important that the interface is able to take account of the complex network of regulation and the legislation that governs it. Complaint Management Specification Requirements Your staff should receive clear guidance on when and how to refer complaints through the escalation procedure for action by line management or specialist staff. You should give all staff clear guidelines on which senior employees need to be kept informed in case of serious complaints or those that involve external bodies. You need to be clear about which areas of your activities/business are subject to statutory or regulatory mechanisms to mandatory or voluntary dispute resolution and should use the relevant mechanism or scheme as appropriate. In other areas of business, industry self-regulation might take precedence over your own procedure, internal or external. In all cases, you should have policies and procedures for external review and resolution of complaints that have reached deadlock within the internal system. Whatever external review procedures are used, you must commit to abide by any decisions made as a result of the review process. Good practice checklist � Make sure that your complaints policy and processes explicitly cover escalation both within the

organisation and to external bodies. � Formally document the escalation paths for complaints in each of your areas of business

(Pensions, Loans, Banking etc.). � Build relationships with relevant external bodies and regulators and keep them up to date with

your complaint policy and processes. Norwich and Peterborough Building Society have put in place a pilot programme that gives customers the option of having a complaint escalated to the organisation’s own consumer panel before it is escalated to the Financial Ombudsman Service. The customer’s statutory rights are not affected but the concept of being dealt with by fellow customers is an interesting concept. � Make sure that there are no barriers in place between front line complaint management and the

senior management of the company that will prevent them knowing what is going on with complaints.

� Make sure that there is a senior staff member responsible for compliance with regulatory and statutory provisions, as well for self-regulation procedure where applicable.


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� Make that all staff understand the role of the regulator and of any other external review procedures.

� Provide adequate resources to support the external review process. How financial services companies are doing This topic is not covered by the CMATTM approach. Measures for success The following can be good indicators of how well your complaint escalation process is working: � Number of cases that are referred to the FOS, other regulators or external review bodies. � Proportion of the cases settled in favour of the customer. � Amount paid out in compensation or lost in waivers. � Trend data in the level of resources allocated to complaints management.


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12 Gaining business benefits from complaints A research study commissioned by the FSA found that 11% of adults living in Britain had made a complaint to a financial services organisation in the last three years. And 62% of respondents were not satisfied with the outcome of their complaint. 78% of those dissatisfied chose to give up rather than attempting to take the complaint further. How many of these do you suspect changed company as soon as they could? And how many were happy with the process by which their complaint was handled even though they were not happy with the outcome? Most people accept the blunt and often quoted fact that it is far more cost effective (and profitable) to retain loyal customers than to acquire new ones. Very few organisations have actually carried out analysis to find out exactly how much more profitable or what are good indicators of likely attrition. We assume that a complaint is an indicator of likely customer loss and some organisations can predict how much more likely a complaining customer is to leave. Other organisations have analysed how much more loyal customers become when they have had a complaint well managed. So, the received wisdom seems to be true. The leading organisations can go one step further and put measures and models around the simple fact. A large UK retail bank monitors the customer usage on its accounts and contacts customers if there has been little or no activity for some time to ask whether there are aspects of the service that that are unsatisfactory. This is designed to anticipate potential dissatisfaction and prevent possible defection. What is clearly true is that loyal customers contribute strongly to profitability through positive referrals, increasing depth and diversity of spend and reduced cost-to-serve. This loyalty must be two-way with the organisation reflecting loyalty to its customers through clear and consistent delivery of its customer proposition and brand promise. The effective management of complaints is one of the few areas left in the highly commoditised Financial Services Market where real competitive differentiation can be achieved. This is particularly important where a customer has a portfolio of products with different companies and compare the way that their dissatisfaction is managed. Complaints can also be used to understand the voice of the customer and can feed directly into the development of new propositions and new products and into the continuous improvement of customer processes. Given that complaints management can have a direct impact on customer retention and loyalty, as well as on overall brand image and market position, it must therefore be seen as a critical component of business performance, receiving sufficient board attention and commitment. Complaint Management Specification Requirements You should regularly review whether your complaints management system fits with your overall strategic direction and with changing markets and situations. The reviews should include:

- Internal factors such as changes in organisational structure or to the products and service offered

- External factors such as changes in legislation, changes in competitive practices, market developments or technological innovation

- Overall performance of the complaints management system

The complaint management process needs to be capable of providing information for complaints analysis.


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Good practice checklist � Ensure that complaints management is a board-level issue, with regular management reviews of

strategy, policy and performance. � Disseminate information about complaints performance across the organisation and discuss with

staff. � Put complaint trends alongside financial factors as a normal part of management review and of the

staff communication process. � Benchmark complaints management performance against market/industry performance and

trends. � Carry out detailed analysis of complaints to provide input to service delivery, proposition

development and product portfolio development. � Carry out follow-up research with a sample of customers who have complained in order to

understand satisfaction with the process of complaint handling as opposed to satisfaction with the outcome.

� Carry out satisfaction research on a further sample customers an extended period after a complaint to see if satisfaction has increased as a result of the complaint.

� Build an understanding of the impact of successfully managed complaints on increased customer satisfaction and loyalty.

� Monitor lifetime value information for customers who have complained to identify the potential value of a well-managed complaint.

� Use the understanding of the value of a well-managed complaint in resource allocation to dealing with complaints of different types and from different types of customers.

How financial service companies are doing � Around 10% of Financial Service Organisations are starting to monitor the transaction patterns of

complaining customers to see if it is affected. � Only around 15% measure customer retention rates and can therefore understand if complaining

customers become more loyal. Measure for success The following can provide good indicators of how well your complaints management is affecting business performance: � Customer retention and loss trends for complaining customers. � Satisfaction level changes for customers who have complained. � Number of ideas / conclusions from complaint statistics analysis that are passed into product and

proposition development processes. � Average cost per complaint dealt with. � Performance against market/industry performance.


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13 Understanding the customer experience of complaints Complaints management processes will typically produce a high level of reporting and statistical information. Successful organisations will supplement this quantitative information with a more direct understanding of the customer experience. Understanding of the customer experience requires timely and incisive event-driven research around key moments of truth that customers go through. Mystery shopping can also provide valuable insights into an organisation’s complaint management. Staff can even be encouraged to contribute to the process, by making complaints of their own or by complaining to competitors. Effort needs to be made to ensure that staff at all levels are clear about which of their particular activities affect the customer experience. In order to better understand the experience of competitive finance offers, some staff of a financial services company were asked to obtain finance from competitors and to report on their experience. In this way a clear picture was built up of the competitive customer experience, which was fed into the development of the company’s own proposition and customer experience. Complaints Management Specification Requirements You should focus on your customers and on seeing complaints as positive feedback that produce positive business results - this is what distinguishes high performing organisations. Good practice checklist � Establish a permanent body, such as a customer panel, that regularly provides feedback on

complaints and other customer management issues. � Include dissatisfaction management and complaints in time-based satisfaction research. � Conduct comprehensive event driven research that covers the key moments-of-truth that occur

during the management of complaints. � Wherever possible encourage staff to experience your organisation’s own complaints process as

customers. � Wherever possible encourage staff to experience the complaints process of competitors. � Conduct mystery shopping of the complaints process using specialist independent resources.

Even consider doing this on a comparative basis with other organisations. � Use recording techniques to enable staff to listen to themselves and colleagues in complaint

management situations. � Use all the findings from the customer experience activity to improve the complaints management

system and to refine the proposition. � Compare the customer experience not just of direct competitors but also of other organisations

with whom they deal (utilities, retail, local government) in order to understand general customer expectations.

� Ensure that senior staff spend a proportion of their time dealing directly with complaints Many organisations have “back to the floor” programmes where senior staff are encouraged to spend time in call centres handling customer calls or working in branches and retail outlets. How financial services companies are doing � Around 20% of Financial Service organisations have a formal scheme that ensures that senior

managers meet a wide range of customers in transactional rather than social situations, including dealing with complaint.


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� 65% still do not carry out any form of Mystery shopping of their customer interfaces. Measures for success � Number of customers attending customer panels. � Number of satisfaction surveys carried out (time-based and event-based) � Number of mystery shopping visits made where a complaint was tested.

banking and finance supplement

Documents

complaints section

important complaints

handled complaints

effective complaint

complaint management

complaint management

background section

significant complaints