Pay-outs rise for poor customer service, says Ombudsman

Natalie Ceeney
Image caption Chief Financial Ombudsman Natalie Ceeney said awards were generally small

A growing number of businesses are being compelled to pay compensation after treating their frustrated customers poorly.

Some 20,019 pay-outs for "distress and inconvenience" were ordered by the Financial Ombudsman in 2010-11, up 1,508 on the previous year.

Most awards were for less than £300, with amounts rarely exceeding £1,000.

Cases included persistent administrative errors and failure to provide services as promised.

For example, one motorist was given compensation by her insurer after waiting for a week for a hire car to be arranged while her own car was being repaired.

Burst pipe

In another case, a bank customer visited his branch to close an account. He then was forced to make a series of follow-up calls and fill in the forms again in a return trip to the branch before his account was finally closed. He was awarded less than £300.

In a more serious case, a family of four had to share a room in a relative's house after their own home was flooded when a pipe burst.

Under the terms of their home insurance, they should have been found alternative accommodation. The ombudsman ordered the insurer to pay compensation of between £300 and £999 to the family.

Compensation payments of more than £1,000 are only paid in exceptional cases.

Image caption The inconvenience must have been caused by the business for compensation to be granted

These included a case in which a man was injured after falling down the stairs while on holiday in Thailand. He needed to be repatriated to the UK for specialist treatment.

However, his travel insurance provider argued he had been drinking so the policy was invalid. His wife explained that he did not drink alcohol and witnesses said he had been sleep walking.

It took the insurer two weeks before it realised the mistake, during which time the injured man's condition had worsened.

Dispute settlement

Generally, these cases did not lead to any financial loss, but compensation was considered appropriate by the ombudsman.

Cases arrive with the independent ombudsman if a business and its customer fail to agree on a dispute.

Compensation can be awarded by the ombudsman, even if the customer has not specifically asked for it in addition to settling the dispute.

Slight inconvenience to consumers, such as a busy telephone line or an incorrectly spelt name, would not result in compensation being awarded.

However, repeated or aggravated mistakes were more likely to result in pay-outs, Chief Financial Ombudsman Natalie Ceeney said.

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