Poor communication behind financial service complaints says FSCL

Financial Services Complaints Limited (FSCL) says many of the complaints it investigates stem from poor communication between financial services providers and their clients.

FSCL’s latest annual results show a 21% increase in enquiries and complaints compared to the same period last year (up to 4,365), continuing the steady year on year increase the scheme has seen since it was established in 2010. Insurance – predominantly travel – remains the largest category of complaints formally investigated by FSCL, followed by consumer credit. Complaints about the sale of personal insurance (life, trauma and income protection), while historically low in number, are on the rise.

FSCL Chief Executive Officer Susan Taylor says the increase was across the board, but a common theme underlying the complaints FSCL investigated was a communication breakdown.

“Many complainants say they were not given important information, or that the information they were given was ambiguous or poorly worded. Other times the complainant hasn’t disclosed certain information or simply hasn’t understood the information provided, be that the terms of an insurance policy or a written recommendation or plan.”

Ms Taylor gives the example of a complaint arising from the November 2016 Kaikoura earthquake, where the insurance broker had not told their client about policy limitations that applied to their business interruption insurance cover. 

The client did not suffer any direct financial loss from the broker’s failure to explain, because no business interruption policy would have provided the full cover he was expecting in the circumstances. However, the complaint could have been avoided if the broker had done a better job of explaining the policy’s limitations when it was sold to the client.

“It’s a reminder to financial service providers to communicate with their clients in plain English and to ensure the client understands the ins and outs of any contract they are about to enter,” says Ms Taylor.

“Equally, consumers need to communicate clearly and openly with their financial service provider and take responsibility for clarifying anything they don’t understand."

The Kaikoura insurance claim case study is available at www.fscl.org.nz/case-studies/kaikoura-earthquake-causes-loss