sydney melbourne brisbane canberra newcastle perth the financial ombudsman service (fos) august 2012

Sydney Melbourne Brisbane Canberra Newcastle Perth

The Financial Ombudsman The Financial Ombudsman Service (FOS)Service (FOS)

August 2012


PresenterPresenter

Jeremy Peck Moray & AgnewPartner Level 8, 440 Collins StPh: +61 3 9600 0877 MELBOURNE VIC

3000

Email: [email protected]


Ongoing Importance of FOSOngoing Importance of FOS

Explosion of GFC related claims over last 3 years.

Possible decline as market conditions improve.

Offset by changes to FOS jurisdiction: Increase in monetary limits for awards. Change in value of claims that might be

brought. Wider class of claimant.


The Role of FOSThe Role of FOS External Dispute Resolution Scheme. Approved by ASIC (RG139). Condition of AFSL if dealing with retail

client. Independent/accessible/fair/accountable/

efficient and effective. Free to consumers. Paid for by industry via fees and levies. Resolves disputes by negotiation, advice

and conciliation. Makes decisions binding on Members (not

consumers).


The Role of FOS – TOR 8.2The Role of FOS – TOR 8.2

Decision making criteria - FOS

“ ….. FOS will do what in its opinion is fair in all the circumstances, having regard to each of the following:

(a) Legal principles; (b) applicable industry codes or guidance

as to practice;(c) good industry practice; and(d) previous relevant decisions of FOS or

a Predecessor Scheme (although FOS will not be bound by those).”


Historical RelationshipHistorical Relationship

PI insurers have been dealing with predecessors of FOS for many years (especially FICS).

Historically, this relationship could be characterised as “fraught”.

FICS/ FOS generally perceived as “applicant” (claimant) friendly.

Nature of FOS in conflict with traditional assumptions of dispute resolution.

Concern in regard to increasing “limits”.


2012 terms of reference2012 terms of reference

Some significant changes. Monetary limits and caps. Consequential and non-financial loss. Time limits. Recommendations and

determinations.


Compensation CapsCompensation Caps

A “cap” is the maximum value of the remedy FOS may award for a “claim” (excluding costs and interest).

Monetary limit for a claim is now $500,000.

Different caps apply for different types of claims.

Caps increased on 1 January 2012. Caps will be indexed.


Amount of CapsAmount of Caps

1 January 2010 1 January 2012

Banking & Finance $280,000 $280,000

General Insurance$280,000, but $3,000 for TP motor vehicle claim

$280,000, but $3,000 for TP motor vehicle claim

Insurance Broking $100,000 $150,000

Investments, Life Insurance & Superannuation

Lump Sum insurance - $280,000Income stream insurance - $6,700 per monthInvestment - $150,000

Lump Sum insurance - $280,000Income stream insurance - $7,500 per monthInvestment - $280,000

Mutuals $280,000 $280,000


CompensationCompensation

Direct financial loss. Consequential (indirect) financial loss

capped at $3,000 per claim. Non-financial loss capped at $3,000 per

claim. Legal or other professional costs or travel

costs incurred by Applicant capped at $3,000 (unless exceptional circumstances apply).


Time LimitsTime Limits

Dispute must be lodged with FOS: within 6 years of date when Applicant

first became aware (or should reasonably have become aware) they suffered the loss; and

where Applicant received “IDR response” within 2 years of the date of that IDR response.

In exceptional circumstances, FOS may consider dispute lodged outside these time limits.


RecommendationRecommendation

Recommendations have been introduced as the first stage of the decision-making process.

A case will proceed to determination by an Ombudsman or Panel if either party rejects the recommendation.


ProcessProcess

Lodge Dispute

FSP response

Negotiation/Conciliation/Assessment/ Decision making


Financial Planner ClaimsFinancial Planner Claims

Importance of initial dispute period. Early involvement of authorised

representatives: Vital evidentiary role.

Without a clear document trail kept by the authorised representative, claims can be hard to defend.


FOS – Indemnity IssuesFOS – Indemnity Issues

Generally Financial Planner PI policies contain FOS Extension or Endorsement.

Sublimit: Generally reflects FOS monetary limit at the

time policy written. This can cause underinsurance as a result of

shifting FOS monetary limit. Applicable to Claim/Award/Complaint. The language of FOS is disconnected from the

language of the PI policies. Substantial underinsurance risk.


FOS Process FOS Process

Not Litigation. No opportunity to test the claimant. Claimant at no cost or litigation risk:

Potential for “Dry Runs”.


FOS ProcessFOS ProcessResponse and ConciliationResponse and Conciliation

Front loads costs. Role of case officers. Conciliation.


FOS ProcessFOS ProcessQuantumQuantum

Application of Monetary Limits to ‘Claims’: Jurisdictional issues pre 1 January 2010. Change in value of claims that can be brought

in FOS changed the issue. Desirability of forum for large claims. Underinsurance.

Assignment of Investments to Members: Evolution. Power? Ramifications:

Administrative Problems. Jurisdictional Issues.


End of PresentationEnd of Presentation

Thank You

sydney melbourne brisbane canberra newcastle perth the financial ombudsman service (fos) august 2012

Documents

fics fos

fos jurisdiction

predecessors of fos

criteria fos

remedy fos

nature of fos

melbourne vic

role of fos tor