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Sydney Melbourne Brisbane Canberra Newcastle Perth
The Financial Ombudsman The Financial Ombudsman Service (FOS)Service (FOS)
August 2012
Sydney Melbourne Brisbane Canberra Newcastle Perth
PresenterPresenter
Jeremy Peck Moray & AgnewPartner Level 8, 440 Collins StPh: +61 3 9600 0877 MELBOURNE VIC
3000
Email: [email protected]
Sydney Melbourne Brisbane Canberra Newcastle Perth
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.
Sydney Melbourne Brisbane Canberra Newcastle Perth
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).
Sydney Melbourne Brisbane Canberra Newcastle Perth
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).”
Sydney Melbourne Brisbane Canberra Newcastle Perth
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”.
Sydney Melbourne Brisbane Canberra Newcastle Perth
2012 terms of reference2012 terms of reference
Some significant changes. Monetary limits and caps. Consequential and non-financial loss. Time limits. Recommendations and
determinations.
Sydney Melbourne Brisbane Canberra Newcastle Perth
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.
Sydney Melbourne Brisbane Canberra Newcastle Perth
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
Sydney Melbourne Brisbane Canberra Newcastle Perth
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).
Sydney Melbourne Brisbane Canberra Newcastle Perth
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.
Sydney Melbourne Brisbane Canberra Newcastle Perth
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.
Sydney Melbourne Brisbane Canberra Newcastle Perth
ProcessProcess
Lodge Dispute
FSP response
Negotiation/Conciliation/Assessment/ Decision making
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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.
Sydney Melbourne Brisbane Canberra Newcastle Perth
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.
Sydney Melbourne Brisbane Canberra Newcastle Perth
FOS Process FOS Process
Not Litigation. No opportunity to test the claimant. Claimant at no cost or litigation risk:
Potential for “Dry Runs”.
Sydney Melbourne Brisbane Canberra Newcastle Perth
FOS ProcessFOS ProcessResponse and ConciliationResponse and Conciliation
Front loads costs. Role of case officers. Conciliation.
Sydney Melbourne Brisbane Canberra Newcastle Perth
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.
Sydney Melbourne Brisbane Canberra Newcastle Perth
End of PresentationEnd of Presentation
Thank You