Complaints data reveals problem areas within financial services industry

Complaints within the financial services industry have implications beyond simply losing a customer or experiencing a moment of bad publicity. The way that financial institutions meet their fiduciary responsibilities and obligations to their customer is a true bellwether of their stability and integrity. Complaints that snowball into systemic issues invite closer scrutiny from regulators, erode public confidence and ultimately threaten the stability of the industry at large.

Of course, it’s no surprise that planning for effective complaints handling and resolution is a top priority for financial institutions across the industry.

When the best laid plans aren’t enough

Despite having in place numerous risk management frameworks and internal dispute resolution mechanisms, a business may not be able to satisfactorily address a customer’s issues every single time. When an issue or complaint cannot be resolved internally for whatever reason, it will often end up going to AFCA.

Mayflower had the privilege of hosting a presentation from AFCA at a recent CREW webinar. The presenters from AFCA were Natalie Cameron, Lead Ombudsman for Banking and Finance, Heather Gray, Lead Ombudsman for Superannuation and April Blair, Senior Ombudsman. They presented data on complaints across banking, insurance, super and credit, both in the last 12 months and since AFCA’s inception in late 2018.

Following is a comparison of data across banking and finance, superannuation, and general insurance, the three areas that contribute the bulk of AFCA’s work in hearing and resolving complaints.

AFCA data

Data insights and systemic issues

Another important role of AFCA is that of identifying and reporting on systemic issues, which provides valuable insights to the industry. Further to simply making decisions and awarding compensation, AFCA examines each complaint closely to determine whether it could be an isolated incident or something which is likely to affect other consumers. These systemic issues are reported to industry and the regulators who are then better equipped to address them.

AFCA is presently investigating 19 definite systemic issues.

Banking and Finance

Banking and Finance is a sector that the average person in the community deals with regularly. It is therefore a function of volume rather than any shortcomings or failures of banks that explains the higher number of complaints and systemic issues in this area.  

In fact, Lead Ombudsman for Banking and Finance Natalie Cameron acknowledges that banks in general have great IDR teams, resolving around 60% of complaints internally. However, the current challenging economic climate is exacerbating complaint numbers. With more people facing unexpected financial hardship resulting in defaults and requests for assistance, there is additional pressure on banks and financial institutions to adequately respond.

Financial scams were highlighted as an area of focus, with approximately 1000 scam-related complaints a month coming in, involving investments, crypto, romance, and remote access. Particularly worrying is the level of sophistication and perceived authenticity of these scams that are able to trick anyone into becoming a victim.

Another area AFCA is watching closely are the Buy Now Pay Later schemes. Complaints around BNPL schemes rose 39% on the previous year, with most complaints around service quality, credit enquiry and unauthorised transactions. Whilst most BNPL organisations currently have voluntary membership with AFCA, regulatory change is anticipated next year.  

Superannuation

Lead Ombudsman for Superannuation Heather Gray notes that whilst superannuation complaints are the ‘minnow in a big pond’, there is certainly concern about the significant rise in complaints in this area and the potential impact on complainants.

Complaints around insurance, payment of benefits and account administration were the top trends in superannuation claims reviewed by AFCA in the last year. Other problem areas observed were in the way funds handle disclosure but also the lack of vigilance on members’ parts around their accounts.

As we work closely with the superannuation industry in various capacities, we got to sit down and interview Heather a few months ago on this very topic. The ensuing article  goes a bit further in picking apart some of the issues affecting the superannuation industry and what changes funds can put in place to address them.

Insurance

Senior Ombudsman April Blair brought us the worrying data around insurance-related complaints, which have seen a steady rise in recent years. April attributes this to the prevalence of serious natural disaster events, saying ‘AFCA receives a flood of complaints every time there is a flood.’

The most common complaints handled involve claim delays, cash settlements and repairs and proximate cause. With further threat of climate-related events almost a sure thing, the consequences of further rises in cases AFCA receives is a worrying prospect to April and the team. 

The ‘Cube’

Suffice to say, we’ve only provided a snippet of the data and research AFCA sources and provides. For more fulsome stats and information, there’s an entire section of the website devoted to data, called the AFCA Datacube. Data nerds rejoice!

Here you can search complaints data by industry, time period, location, and even product. The Cube also allows you to find information on resolutions and look at data comparatively. If you haven’t already, check out this great resource that’s publicly available at AFCA Datacube.

For our part, we will definitely be keeping an eye on this data closely going forward. Complaints are never fun to receive or respond to but having the opportunity to improve is certainly a silver lining.

And in breaking news, ASIC is taking Telstra Super to court regarding their internal complaints processes. Just goes to show, managing a super fund means juggling an awful lot of balls, and you can’t afford to take your eyes off any of them.

If you are concerned that your complaints handling processes aren’t up to scratch, please contact us. Don’t wait until you’ve got ASIC knocking at the front door!