The Current State of FOS Complaints – Q1, FY 2024 / 2025

Here's a snapshot of the current landscape following the recent release of Q1 2024 / 25 data:

1. Significant Increase in Complaints: A 70% Surge

Complaints submitted to the FOS have increased by 70% compared to the same quarter last year. This rise is particularly striking, as the easing of the cost-of-living crisis had led many to expect that complaint levels would stabilise.

A notable driver of this increase is the activity of claims management companies, which now account for nearly half of all complaints, a marked rise from 17% for the equivalent period last year.

This surge is largely due to complaints concerning motor finance and responsible lending. However, it's important to note that the uphold rate for CMC-represented complaints is lower than the average for the quarter, standing below the overall rate of 37%.

2. Fraud and Scams: A Growing Concern

CMCs are driving a significant rise in fraud-related complaints in Q1. This may also be influenced by impending fees for CMC-led complaints at the FOS.

In Q1 alone, nearly 9,000 fraud complaints were logged—a new record. Over half of these related to online bank transfer fraud, or Authorised Push Payment (APP) scams, which are becoming increasingly sophisticated. Additionally, investment-related fraud complaints reached 1,500 cases, up from 1,100 the year before. Despite improvements, investment fraud continues to have a high uphold rate of 44%, against the FOS average of 37%.

Moreover, the Payment Systems Regulator (PSR) has proposed reducing the maximum APP fraud refund to align with the Financial Services Compensation Scheme (FSCS) limit of £85,000, down from the current FOS limit of £415,000.

Investment scams continue to drive a significant number of complaints, a trend that shows no signs of abating. Firms operating in this sector are under increasing pressure to manage these issues effectively, especially given the high uphold rates for such complaints.

3. Travel Insurance Complaints Reach Pandemic Levels

Complaints related to travel insurance have risen to their highest level since the pandemic, reaching a peak not seen in the past decade, excluding 2020/21. These complaints are primarily driven by unsuccessful claims on policies where insurers have justified their decisions based on:

• Failure to disclose pre-existing medical conditions (PEMCs)
• Insufficient emergency assistance while abroad
• Delayed or missed flights
• Lost or stolen luggage

4. Buildings Insurance Complaints: A 10-Year High

In addition to the surge in travel insurance complaints, buildings insurance claims have also hit a 10-year high. The rise in complaints in these typically stable sectors highlights a shift in consumer expectations. Increasingly, customers are more likely to escalate their grievances to the FOS if their complaints are not satisfactorily addressed by firms in the first instance.

Key Takeaways for Firms

The sector continues to adapt to the fraud landscape, though methodologies will invariably continue to shift as scammers attempt to exploit or circumvent firms’ policies and controls.

Delivering support to staff to promote continued awareness, as well as segregation of duties, regular audits, stringent documentary requirements for transactions and removing single person dependencies within critical processes can support firms in staying ahead of the issues. The continued development of AI-driven fraud detection systems will remain on firms’ radars – they will need to decide whether any investment is proportionate / effective in lessening the risk to their individual businesses.

Complaints hitting recent highs in typically more settled sectors is perhaps indicative of the increased expectations of customers and the greater propensity to escalate a complaint if it's not satisfactorily resolved at first instance. The cost to businesses of not getting complaints right is increasing due to these higher consumer expectations. More cases taken to FOS leads to higher case fees - and the resource it takes to service these complaints.

Getting things right at the front end is more important than ever to deliver excellent customer service and ensure efficient use of firms’ resources and time. Some questions to reflect on include:

• Does your firm ensure Agents / Advisors have a remit to resolve complaints at the first point of contact?
• If so, are Agents / Advisors supported to do this (clear targets, guidance, training and support, clear D&I payments policy)?
• Does your firm have a robust complaint definition and is materiality understood across your operation?
• Does your operating model apportion the right level of resource to dealing with complaints at point of contact, within three days and within 56 days? Can you flex this model to absorb planned or unplanned spikes in activity, e.g. in response to market issues?

Look out for continued updates aligned to the release of quarterly, half-yearly and annual FOS complaints data.