Banking and Finance supplement

BSI Management Systems

Banking and Finance Supplement
to the Complaints Management
Specification CMSAS 86:2000

NO COPYING WITHOUT BSI PERMISSION EXCEPT AS PERMITTED BY COPYRIGHT LAW


Contents

Part A Introduction and background
Section 1 About this supplement 3
Section 2 Why complaint management is important 3
Section 3 How we know what’s actually going on 4
Section 4 The good practice checklist 5

Part B Managing complaints
Section 5 Openness to hearing about dissatisfaction 6
Section 6 Clear complaints policy and processes 8
Section 7 Skilled and motivated complaint management staff 10
Section 8 Elements of the process that affect all complaints 12
Section 9 Special factors affecting complaints from consumers 14
Section 10 Special factors affecting complaints from or via intermediaries 16
Section 11 Complaint escalation and the interface with regulatory bodies 18
Section 12 Gaining business benefit from complaints 20
Section 13 Understanding the customer experience of complaints 22

© BSI 07-2003 2


PART A – INTRODUCTION AND BACKGROUND
1 About this supplement
This supplement is designed to help Banking and Financial Services organisations get the most out of
the BSI Complaints Management Specification (86:2000).

The Specification to which it refers sets standards for a complaint management system within any
organisation against which an audit can be carried out to confirm that required standards are being
met. However, the Specification is generic in terms of the type of business. This supplement and
others in this series help interpret the Specification and its requirements for individual business
sectors.

It must be emphasized that this supplement only guides you to a Banking and Financial Services
interpretation of the Complaint Management Specification. In order to achieve registration against the
Specification it will be necessary to convince yourself and the auditor that all the requirements of the
actual Specification have been met.

It is also important that each organisation develops its own complaint processes, standards and
systems. This supplement shares some good practices that other organisations are employing both
within the Financial Services sector and outside it, but you must take this as input to your own
techniques, not as a blueprint solution.

Having said all of the above we are convinced that this supplement provides high value support in
planning and implementing your own complaint management activity and unlocking some of the many
competitive advantages and business benefits available to organisations that manage complaints well.

2 Why complaint management is important
Complaints are often seen as negative.

How wrong can this be?

Leading organisations are increasingly realising that a complaint is often a real expression of a desire
to remain as a customer of your organisation despite the fact that something is wrong. Customers may
not even call their enquiry a complaint and some organisations use terms other than ‘complaint’ to
describe expressions of customer dissatisfaction. The principles are the same and no degree of clever
wording can disguise the need to deal with customer dissatisfaction positively and effectively.

It is true that in financial services customers may be committed to a policy or a contract on some
occasions, thereby making it difficult to transfer that piece of business elsewhere. But what about all
their other financial business and what about their renewal. Customers have long memories for bad
experiences and good experiences. What they quickly forget is mediocrity. The risk of losing a
customer’s whole portfolio because of a poorly handled complaint relating to just one of their products
is high.

Effective complaint management does a number of things for your organisation:
It reduces the ‘Reputational Risk’ associated with publicity around badly handled complaints
It improves customer confidence, satisfaction and ultimately loyalty
It improves employee satisfaction as they can do the good job for customers that they want to do

Section 12 of this supplement looks specifically at how you can realise business benefits through
effective complaint management.

Carry out a search on the word ‘complaints’ on the Internet and you will get an idea of the breadth of
coverage of the subject: from statistics; to computer systems; customer forums to people setting up
websites just to complain about a single company.

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Regulatory bodies are also becoming more focussed on complaints and how they are handled. The
April 2003 FSA Handbook has a very substantial section on complaints. (Available at
www.fsa.gov.uk/vhb/html/disp/DISPtoc.html ). This reflects the requirement, within the financial
services industry, for ALL SIGNIFICANT COMPLAINTS to be reported to the FSA.

There is not just a single regulator in the financial services sector. The General Insurance Standards
Council (GISC) has specific complaint management guidance for the insurance industry. The
regulatory framework is not static either. There will be changes in the framework over the forthcoming
months and years that affect the way that complaints are managed and escalated. In addition, other
standards bodies and quality registration organisations such as ISO, EFQM and Baldrige are taking
complaint management very seriously when considering how well organisations are dealing with their
customers.

Even with all this regulation the standards set by the financial services industry bodies can only be
considered as minimum standards. To provide a best-in-breed complaint management capability and
to use it as a competitive advantage organisations need to do far more that the minimum.

3 How we know what’s actually going on
One of the elements of this supplement is to share with you the
degree of effort that the Financial Services industry is putting into
dealing with complaints. We can do this using information
TM
provided by QCi Assessment Ltd. from their CMAT (Customer
Management Assessment Tool) approach.

This assessment and benchmarking approach has been used by over 600 organisations globally to
understand how they are currently managing their customers compared to best practise. It focuses on
the delivered reality of people, process, systems and practices rather than management plans and
intention. It provides a unique insight to what’s really happening.

The assessment is against a
Insurance
wide model of customer
management and a wide mix Other financial services

of company types. The B anks
statistics we use in the B uilding so cieties
remaining sections of this Travel and distributio n
supplement are taken just
Other sectors
from the section called
‘Managing Dissatisfaction’ P ublishing and media
and just from Financial M o to r
Services companies. To put Retail
this in context the overall
Teleco ms
scores for Managing
Dissatisfaction (where 100% Techno lo gy
is best practice) for the various Energy
Financial Service sectors are
shown here against other sectors. 0 10 20 30 40 50 60

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4 The good practice checklist
Each section of this supplement proposes good practices that can be adopted to deliver excellent
complaint management as well as give the best possible chance of meeting the requirements of the
specification. Not all of the proposed practices will be relevant in all situations but together they form a
good start point for the set of practices that you need in place.

In order to assess
where your
organisation is
against these
practices you can
use each section
in this supplement.
In addition, you
can use a new,
free, on-line
service launched
by BSI in
conjunction with
the supplement.
This service has
been developed in
conjunction with
QCi Assessment
Ltd who own the
TM
CMAT service
explained in
section 3. The
service is easy to
use and provides a quantitative indication of how well your organisation is currently delivering the
good practices identified in this supplement. The service can be used as many times as you like, for
different business units within your organisation. It is accessible at www.cmat.biz/bsifinancial

© BSI 07-2003 5


PART B – MANAGING COMPLAINTS
5 Openness to hearing about dissatisfaction
It is of course true that some complaints are not justified and are from customers simply looking for
some form of compensation. But most customers simply want the problem quickly resolved and
research has clearly shown that less than 15% of complaining customer want any form of financial
remedy.

More worryingly, many customers cannot be bothered to complain and most will be reluctant to use a
formal or official process. A customer who takes the time to complain and is confident that the
recipient will take note and listen is a customer who wants to be loyal. An organisation with a high
level of complaints might be open and responsive to customers rather than having a high level of
customer dissatisfaction.

A complaint that is escalated to senior people in the company, solicitors or even to the Financial
Ombudsman is time consuming and may not be constructive. Escalation is often a result of a less than
‘open’ reaction to the complaint lower down the organisation and earlier in the process.

One household name organisation
changed its whole philosophy on Complaints Satisfaction
complaint management. Instead of 200
targeting regions on reducing the
number of complaints each quarter, it 150
changed to targeting an increase in
the level of complaints. The number of 100
complaints nearly doubled but
customer satisfaction increased 50
substantially as customers realised
that their complaints were being dealt 0
with effectively. Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002

Complaint Management Specification requirements
Your complaint management philosophy should be open and encourage customers to complain when
things go wrong, or are not up to a customer’s expectations.

Your organisation needs a culture of ‘accepting responsibility’ and ‘getting things right’. Your complaint
process should be visible to customers who should be able to complain in person, by phone, in writing,
by email or any other contact method they prefer to use.

A well-known Insurance organisation changed its strategy of not publishing complaint office phone
numbers on its Internet site. It now actually presents a guide of how to complain on its website with a
choice of registering complaints electronically of by phoning a special phone number.

You need to widely publicise information about how to complain in places such as:
- Retail outlets and offices
- Renewal notifications
- Product literature
- Right-to-cancel notices
- Web sites

Also, subject to regulatory requirements around contractual language, you will need to provide help to
customers with limited literacy skills and those requiring support in languages other than the normal
operating language of your organisation. This might be achieved by directing them to organisations
that can help them to complain.

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Good practice checklist
Look for indicators of dissatisfaction before complaints occur and pre-empt them. Examples are
early settlement enquiries or requests for the name of the Chief Executive.
Encourage an ‘open and responsive’ attitude to complaints when they occur.

A retail bank employed a senior manager from a manufacturing company where reporting complaints
was seen very positively and was compared to reporting a ‘near-miss incident’ which could prevent a
serious accident in the future. He introduced the same concept to the bank with complaints being seen
as the first step in preventing a customer from defecting.

Have a clear and wide definition of a complaint so that all staff know when to deal with customer
contact using your complaint management process.
Use consumer ‘education’ practices to reduce the number of unjustified complaints.

A utility company analysed the ‘root cause’ of over 50,000 complaints. Less than 30% were due to a
physical service failure or product shortcoming. More than 70% were due to a mismatch between what
consumers thought they were buying into and what they actually got. After further analysis half of this
misunderstanding was due the customer-facing staff (including sales people) not being clear on what
the organisation was promising to consumers.

Provide easy access to your complaints process - on every contact method you use to deal with
customers and prospects.

A bank carried out an analysis of how comprehensive its complaint process was. It found that for each
complaint that went through its formal head office complaint management process it could identify 28
indicators of dissatisfaction in its day-to-day dealings with customers. Half of these had been identified
at branch level but half had not been communicated to the organisation at all by the customers.

Provide support in operating the complaints process to customers with limited literacy skills or
limited language capability.
Introduce targeting and reporting that encourages staff to record all complaints as a positive
means of improving customer service

How financial service organisations are doing
70% of Financial Service Organisations have senior management who demonstrate that complaint
management is a critical business process.
Only 38% can clearly demonstrate that they actively publish telephone numbers to use for
complaining.

Measures for success
The following can be good indicators of the openness of your complaint management:

Total number of complaints compared to overall customer satisfaction level – If satisfaction is
dropping but complaints are not increasing there is probably a problem with the complaint
management process.
Number of defecting customers who didn’t complain before leaving – If customers defect without
even complaining then they probably have little faith in the complaint process.
Number of complaints that are about the complaint process itself – As many as 70% of complaints
can actually be due to frustration with not getting an earlier complaint dealt with.
Poor attitude of staff towards the complaints process in staff attitude research – Staff can often
provide a more candid view of the organisation than simple process measures.
Proportion of complaints made to regulatory bodies where the organisation was not previously
aware of the issue – If customers bypass an organisation and go straight to a regulator they
probably have little faith in the vendor.

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6 Clear complaints policy and processes
Customers and staff want a complaints policy that is visible, clear and easy to use. Complaint
management is one of those business areas where policy and processes absolutely need to be clearly
documented and communicated. Informal policies and variable processes often cause more
complaints than they help resolve.

Even in organisations where the management style is more ‘free-flowing’ it is critical to have a high
degree of formality and control around complaints.

Complaints Management Specification Requirements

You should have a documented complaints policy that is endorsed by senior management and is
available to all staff, even those who do not deal directly with customers. It needs to be made available
by means that are appropriate to the organisation and the staff. So it is not sufficient to simply make a
hard-copy version of the policy available at head office. The policy should, for example, be available in
the company intranet or emailed to all people on the email system.

The complaints policy should clarify:
- What type of contact is considered a complaint
- The key points in the complaints management process
- The relationship with legal requirements and regulatory bodies such as the FSA
- The relationship with quality and service delivery objectives
- The roles and responsibilities of all staff with respect to complaint management

It is also critical that the complaints policy and process documentation are kept fully up-to-date.
Updates should take into account a wide range of input including customer research, staff input, input
from intermediaries and comments and feedback from regulatory bodies.

Clear targets for complain resolution timescales should be put in place covering the various stages of
the complaint process (Acknowledgement, Initial Response, Final resolution etc.)

Audits of the complaint process should be carried out periodically by staff who are as independent as
possible from the activity that is being audited. The audits should provide information on whether the
complaints management system fulfils the stated policy aims and that the system has been
implemented effectively.

Management should also monitor complaint management performance on an ongoing basis to identify
areas of the business that could be improved. Monitoring can include:

- Levels of customer satisfaction at how complaints were handled
- How well the complaints management system meets it targets
- Whether repeat problems are being identified and corrected

Formally document your complaints policy.
Ensure that all cross-border considerations are identified and considered in your complaint
management policy.
Make sure that there is explicit and visible senior management endorsement of the complaint
policy and processes.

A retailer requires all store managers personally to handle at least 10% of customer complaints,
including contacting the customers. Store managers also spend at least one day a year dealing with
complaints in the central customer service office.

© BSI 07-2003 8


Document your complaint management processes in a way that assists in communication to staff
and intermediaries.
Make sure that every member of staff has easy access to the complaints policy and processes in
a way that suits their location and way of working.
Have a customer-facing version of your complaint policy that is offered to customers at an early
stage of complaint.
Seek input from internal staff and intermediaries on the operation of complaint processes and how
these can be improved.
Seek feedback from regulatory bodies involved in the escalation of customer complaints on how
your policy and processes are operating.
Make sure that the complaints policy sure that your complaints policy and processes are regularly
reviewed and updated.
Carry out periodic audits of your complaint management process using resources that are as
independent as possible.


Only 30% of Financial Service organisations have a completely clear definition of what constitutes
a complaint.
Less than 25% report progress back to complaining customers during the process of dealing with
the complaint.

The following can be good indicators of how clear your complaint policy and processes are:

The number of complaints that are about the complaints process itself or that are escalated (in
particular to an Ombudsman) because of failures in the complaints process
The level of ideas for improvement received from staff, intermediaries and regulators
The level of senior management involvement in the review of complaints policies and of
complaints management performance
The average length of time between updates to the policy and processes

© BSI 07-2003 9


7 Skilled and motivated complaint management staff
A clear policy and effective processes are a pre-requisite for good complaint management but these
are of very limited use if the staff that operate them do so half-heartedly or without the skills they need.
The vast majority of your staff will want to do a good job for customers and will particularly want to
help customers who are dissatisfied. They need training and they need the support of the organisation
in dealing with complaints.

Complaint Management is a specialised business discipline and is not something that can be staffed
by people without a certain character and mind-set. The chances of dealing with customer complaints
effectively is greatly reduced if the main complaint management teams are dissatisfied with their roles
and do not feel valued by the organisation.

The management of the whole dissatisfaction process is also a specialist role that needs a customer
service professional as opposed to just being part of a larger and more general role.

Outsourcing of the complaint handling process to a call centre or other type of organisation does not
remove the responsibility from your organisation, only the resourcing. An outsourced complaint
management facility requires the organisation to be just as demanding of the staff recruitment, training
and motivation as for an in-house resource. Customers will not make allowances.

All staff, even if they are not normally customer interfacing, should have a basic knowledge of the
complaint management policy and processes within the organisation. They should at least be able to
direct a customer into the complaint management process or preferably be able to deal with basic
complaints themselves.

Staff who deal with complaints as their main role should be given suitable training for the type and
level of complaints being dealt with.

The organisation must be able to demonstrate that its complaint processes are fair to staff.

An organisation discovered, during a review of the complaints procedure, that staff did not feel that the
system was fair to them. Staff believed that having a complaint made against them was made worse if
it appeared to be handled unfairly. A number of changes were made to increase openness and
provide support for staff.

Staff should be given clear guidance on the conditions under which they can or should break off
discussions with a person who is complaining. This will typically result in some form of escalation.

All complaint management staff should be able to input to the development and improvement of the
organisation’s complaint management policy and processes.

The organisation must also be able to show that it has allocated an appropriate level or resources to
complaints management.

Recognise that complaint management is not the same as compliance.
Encourage a clear “no-blame culture” that encourages staff to see complaints as positive - and not
hide them for fear that they will reflect badly on them as individuals.
Make sure that all staff know the names of the Chief Executive and the Customer Service Director
(or equivalent).
Have clear resourcing assumptions in place that enable accurate calculation of the relevant level
of complaint management resource that is required.

© BSI 07-2003 10


Have flexible resourcing for complaint management so that peaks in complaints can be handled
without deterioration in service.
Set and communicate a clear limit of responsibility for all staff in terms with the type and nature of
complaint with which they should be expected to deal.
Provide relevant, high quality training to people who are likely to receive or deal with customer
complaints.
Make full use of coaching and mentoring techniques using the skills and experience of successful
complaint management staff as well as supervisors and managers.
Disseminate information about complaints performance across the organisation and discuss with
staff.


Only 16% of financial service organisations have a real ‘no-blame’ culture that encourages staff to
look upon complaints as positive.
Less than 30% have formal and specialist complaint management training in place.
26% are actively using coaching and mentoring as well as formal training.

The following can be good indicators of how skilled and motivated your staff are:

The proportion of staff and intermediaries who have seen and understood the complaint policy and
processes for complaints management.
The amount of resource allocated to staff development in the area of complaints management.
Turnover on complaint management staff.
Number of customer complaints about the complaint management process itself.
Staff research results regarding their training and motivation in handling complaints.

© BSI 07-2003 11


8 Elements of the process that affect all complaints
The complaints management process needs to be capable of handling complaints from all categories
of customers (and potential customers) through all available channels. In financial services this will
include branches and, importantly, intermediaries such as brokers and independent financial advisors.
You should apply consistent standards across all areas of the business and make sure that
intermediaries understand how to apply these standards in their dealings with customers.

Because complaints management is primarily about retaining and satisfying good customers, the
process needs to give customers confidence that they will be treated fairly and honestly. When a
customer complains their expectations can easily decay into disappointment if they are not treated
well. They then become at risk of defecting, which can seriously damage an organisation’s financial
performance.

Effective complaints management systems need the appropriate people skills and not just the right
processes. A no-blame culture is critical as staff need to be confident that that the complaint they
handle will be taken seriously, that it will not swept under the carpet and that they will receive
recognition for their contribution.

Your organisation should make a demonstrable commitment to fairness in all complaint handling
activity. The principle of fairness should be clearly specified in the complaints management policy and
be put at the heart of the process, including those that apply to intermediaries.

All efforts should be made to have a process that deals with as many complaints as necessary at the
first point of contact. Where this is not possible the organisation should co-ordinate the inputs of the
various internal or supply chain groups into a single response to the customer.

Customers should be given timescales for the resolution of their complaint and kept informed, by an
appropriate method, of the progress of their complaint. They should also be given a contact name if
they wish to check on progress.

You should cater for the particular nature of complaints relating to cross-border transactions. This can
be particularly important in the financial services sector, and is also relevant to dealings through
intermediaries.

You should not receive any revenue from complaints, for example by customers having to use a
premium rate telephone service.

Record all complaints, irrespective of where they are received into the organisation.
Develop a simple but comprehensive coding system for use in recording and analysing
complaints.
Empower staff to provide on-the-spot resolution of complaints in as many cases as possible.

A well-known credit card company introduced a scheme to empower staff to deal with complaints at
the first point of contact. They set themselves an ‘FFC’ target (Fixed at First Contact) which was met
and they estimated that total cost of complaint handling reduced by over 15%.

Allocate a complaint co-ordinator to all complaints and communicate this is to the person
complaining.
Give the person complaining a timescale within which they will receive a response.
If the period taken to deal with a complaint is extended then provide progress reports via an
appropriate medium.

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Make sure that only a single response on the complaint goes back to the customer irrespective of
the number of internal groups or supply chain organisations that are involved.
Audit responses to complaints to ensure clear language and obvious fairness.
Make sure that complaints management standards are applied equally across all parts of the
organisation, including intermediaries.
Check back once a complaint is closed to ensure that the person who made the complaint also
thinks it is closed.

How financial service companies are doing

30% of Financial Service Organisations now formally allocate a named co-ordinator for all
complaints and communicate this to the complaining customer.
40% of Financial Service Organisations provide complaining customers with a formal timescale
within which their complaint will be dealt.


The following can be good indicators of how well your overall complaint management is performing:

The overall number of complaints received.
The proportion of complaints resolved at the first contact.

Resolving an enquiry at the first stage reduces the cost by 50%

Average number of customer contacts during a complaint.
Average time to close a complaint.
Proportion of complaints where the person complaining was satisfied with the way they were
handled.
Total number of training days on complaint management.

© BSI 07-2003 13


9 Special factors affecting complaints direct from consumers
There are five things that can typically happen when a customer is unhappy.

- They can suffer in silence
- They can defect in silence
- They can tell other people about their dissatisfaction
- They can go public about their experience, by writing to newspaper, consumer programmes
or, increasingly frequently now, posting negative comments on websites
- They can communicate their unhappiness to the organisation

The final action is the only positive one – giving the organisation an opportunity to put things right and
learn for future improvement. And yet only about 4% of customers complain. But where an unhappy
customer is likely to tell 10 other people, a loyal and satisfied one may only tell 2.

A lost customer also costs more to win back than retaining an existing customer who may be unhappy.
90% of dissatisfied customers who defect say that they will never come back. And yet 90% of
customers whose complaints have been handled effectively will not defect.

Customers should not have to produce inessential documentation to support a complaint. Your
procedure should aim to collect standardised information, either in a pre-printed form, on-line form or
contact centre script, that:
- Is easy to complete, in plain language, and jargon free

A building society improved satisfaction with complaint handling from 45% to 66% after implementing
a plain language training programme for complaint handling staff.

- Allows for personalised input from the customer
- Covers the information needed to support the organisation’s complaints management
system

You should keep detailed information about customers and their complaints but these should be kept
confidential as appropriate. Customer data needs to be protected.

You should have procedures in place to allow the exchange of information between departments or
partner organisations, so that customers do not have to make a number of separate
enquiries/complaints.


Flag all customers who have current complaints on the customer database so that this is apparent
to any person from the organisation who is dealing with that customer.

A large retail bank integrated its various systems that held customer data through a web-based front-
end that was available through a range of contact channels. The front screen was able to bring
together in a single view all the customer interactions, including complaints. The system has helped to
make all customer interactions more personal and higher value.

Ensure that staff who are dealing with enquiries have access to as much information as possible
about customers, including information on their value and importance to the organisation.
Offer a base standard of courtesy, acknowledgement and response to all customers, irrespective
of their value to the company.
Develop Intensive care strategies that can be deployed for particularly valuable or important
customers when a complaint is received.

© BSI 07-2003 14


Make sure that customer information is handled sensitively and kept confidential.
Investigate the root causes of all complaints and take effective action to prevent re-occurrence
rather than simply applying quick fixes.
Where relevant and appropriate give customers the opportunity to meet or at least talk to the staff
member handling the complaint.


Less than 10% have any mechanism in place to reliably record the fact that a customer is in the
process of having a complaint dealt with so that the rest of the organisation can see this in any
dealings with the customer.
Less than 5% consistently check back with complaining customers that they are satisfied with the
way their complaint was handled.
Around 25% carry out analysis of the root causes of complaints and feed this into product
development or business process change.


The following can be good indicators of how well your complaint management is performing with
respect to complaints from end customers:

Proportion of complaints flagged on the customer database.
Number of intensive care strategies triggered.
Number of ‘thank-you’ communications from customers regarding the complaint process
Number of root cause issues identified.

© BSI 07-2003 15


10 Special factors affecting complaints from or via intermediaries
Many customers deal with intermediaries (brokers, independent financial advisors) to access or buy
financial services. In fact customers often do not know or even care whether they are dealing with an
intermediary or the actual finance provider. They are still dependent on the end provider for service
quality and customer experience. Any failures or breakdowns will have a negative impact on both the
intermediary and the financial services organisation. Financial services providers must make sure that
complaints management systems encompass dealings through intermediaries, or risk damage to their
brand image and market position.

When an intermediary highlights a problem with a financial services provider, it is either:
- Already a customer problem that they cannot solve
- It is going to become a customer problem if it is not corrected, or
- It is going to become the organisation’s problem if it causes the intermediary to transfer
business away from you

The relationship between the organisation, the intermediary and the consumer is not always simple in
the financial services industry. It can be affected by whole different sets of law; those of agency and of
contract. This can mean that great care is required in understanding the nature and relationships
involved in a complaint from, via or about an intermediary. The complaint management standards for
intermediaries must at least be consistent with those that they have for consumers and preferably be
complementary and supportive.

Your policy and key processes will need to be common for consumers and intermediaries, with
additional features developed as necessary. The principles of accessibility, fairness and honesty will
need to be preserved. Escalation procedures and the interface with regulatory bodies will also need to
be particularly robust.

You should also make sure that your complaint management audit and review processes include
complaints that originate from or are handled by intermediaries.


Make sure that complaints management policy and processes explicitly extend to the intermediary
network.
Get formal acceptance from all intermediaries that they are prepared to share in the basic ethos
and principles of the organisation’s complaints management approach.
Wherever possible and relevant, put in place service level agreements between providers and
intermediaries with respect to complaint management.
Check that each intermediary has a detailed complaint process in place that is consistent with that
of the provider’s organisation.
Document the points at which complaints should be escalated from the intermediaries complaint
management system to that of the provider even if the person complaining has not specifically
asked for this.
Provide intermediaries with access to complaint management processes that enable them to
bypass call queues if they are face-to-face with a customer.
Provide intermediaries with a named contact within the organisation for dealing with complaints
and customer problems.
Make sure that the intermediary has a specific senior person with responsibility for dealing with
customer complaints.
Put in place mechanisms to ensure that information regarding complaints can be efficiently
exchanged between intermediaries and providers.
Provide feedback to intermediaries on the outcome and learning from any complaints that they
pass on to the provider.

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How financial services companies are doing

20% have comprehensive measures frameworks in place and agreed with their intermediaries.
Most of these include a complaint reporting element.
35% feel that they get full and open co-operation on complaint management from all of their
channels, including intermediaries.
The Financial Services industry is not known for managing its intermediaries as channel partners
in the same way as other industries. This is emphasized by the fact that none of Financial Service
Companies on the CMATTM benchmark database had any form of ‘intensive care’ strategy in place
for complaining intermediaries.


The following can be good indicators of how well your complaint management is performing with
respect to complaints from and via intermediaries:

Number of complaints from intermediaries
Number of complaints via intermediaries from customers
Number of complaints received direct from customers about Intermediaries
Customer satisfaction figures from intermediaries
Customer retention and recruitment figures from existing or potential intermediaries

© BSI 07-2003 17


11 Complaint escalation and the interface with regulatory bodies
Escalation of complaints can either be through the organisation’s own complaints management
system or to an external adjudicator such as the Financial Ombudsman Service. In some cases, a
customer may go straight to the Ombudsman. This section covers both internal and external
escalation of complaints.

You should aim to deal with as many complaints as possible at the first level of contact but some
cases will need to be handled at a higher level. The staff member handling a complaint might not have
the knowledge or authority to take action, because the customer does not accept the proposed
resolution or because the complaint has broader implications that require senior level review. In
whatever case, the organisation needs to have in place clear and effective escalation procedures that
are communicated to all staff and that are regularly reviewed as part of the general reviews of
complaints management.

The interface with regulatory and adjudicating bodies is very important in financial services, especially
as it concerns areas like consumer protection. But the FOS, Pensions Ombudsman and other
adjudicators only regulate certain types and areas of the financial services business so it is important
that the interface is able to take account of the complex network of regulation and the legislation that
governs it.

Complaint Management Specification Requirements
Your staff should receive clear guidance on when and how to refer complaints through the escalation
procedure for action by line management or specialist staff. You should give all staff clear guidelines
on which senior employees need to be kept informed in case of serious complaints or those that
involve external bodies.

You need to be clear about which areas of your activities/business are subject to statutory or
regulatory mechanisms to mandatory or voluntary dispute resolution and should use the relevant
mechanism or scheme as appropriate.

In other areas of business, industry self-regulation might take precedence over your own procedure,
internal or external. In all cases, you should have policies and procedures for external review and
resolution of complaints that have reached deadlock within the internal system. Whatever external
review procedures are used, you must commit to abide by any decisions made as a result of the
review process.


Make sure that your complaints policy and processes explicitly cover escalation both within the
organisation and to external bodies.
Formally document the escalation paths for complaints in each of your areas of business
(Pensions, Loans, Banking etc.).
Build relationships with relevant external bodies and regulators and keep them up to date with
your complaint policy and processes.

Norwich and Peterborough Building Society have put in place a pilot programme that gives customers
the option of having a complaint escalated to the organisation’s own consumer panel before it is
escalated to the Financial Ombudsman Service. The customer’s statutory rights are not affected but
the concept of being dealt with by fellow customers is an interesting concept.

Make sure that there are no barriers in place between front line complaint management and the
senior management of the company that will prevent them knowing what is going on with
complaints.
Make sure that there is a senior staff member responsible for compliance with regulatory and
statutory provisions, as well for self-regulation procedure where applicable.

© BSI 07-2003 18


Make that all staff understand the role of the regulator and of any other external review
procedures.
Provide adequate resources to support the external review process.


This topic is not covered by the CMATTM approach.


The following can be good indicators of how well your complaint escalation process is working:

Number of cases that are referred to the FOS, other regulators or external review bodies.
Proportion of the cases settled in favour of the customer.
Amount paid out in compensation or lost in waivers.
Trend data in the level of resources allocated to complaints management.

© BSI 07-2003 19


12 Gaining business benefits from complaints
A research study commissioned by the FSA found that 11% of adults living in Britain had made a
complaint to a financial services organisation in the last three years. And 62% of respondents were not
satisfied with the outcome of their complaint. 78% of those dissatisfied chose to give up rather than
attempting to take the complaint further. How many of these do you suspect changed company as
soon as they could? And how many were happy with the process by which their complaint was
handled even though they were not happy with the outcome?

Most people accept the blunt and often quoted fact that it is far more cost effective (and profitable) to
retain loyal customers than to acquire new ones. Very few organisations have actually carried out
analysis to find out exactly how much more profitable or what are good indicators of likely attrition. We
assume that a complaint is an indicator of likely customer loss and some organisations can predict
how much more likely a complaining customer is to leave. Other organisations have analysed how
much more loyal customers become when they have had a complaint well managed. So, the received
wisdom seems to be true. The leading organisations can go one step further and put measures and
models around the simple fact.

A large UK retail bank monitors the customer usage on its accounts and contacts customers if there
has been little or no activity for some time to ask whether there are aspects of the service that that are
unsatisfactory. This is designed to anticipate potential dissatisfaction and prevent possible defection.

What is clearly true is that loyal customers contribute strongly to profitability through positive referrals,
increasing depth and diversity of spend and reduced cost-to-serve. This loyalty must be two-way with
the organisation reflecting loyalty to its customers through clear and consistent delivery of its customer
proposition and brand promise.

The effective management of complaints is one of the few areas left in the highly commoditised
Financial Services Market where real competitive differentiation can be achieved. This is particularly
important where a customer has a portfolio of products with different companies and compare the way
that their dissatisfaction is managed.

Complaints can also be used to understand the voice of the customer and can feed directly into the
development of new propositions and new products and into the continuous improvement of customer
processes.

Given that complaints management can have a direct impact on customer retention and loyalty, as
well as on overall brand image and market position, it must therefore be seen as a critical component
of business performance, receiving sufficient board attention and commitment.

Complaint Management Specification Requirements
You should regularly review whether your complaints management system fits with your overall
strategic direction and with changing markets and situations.

The reviews should include:
- Internal factors such as changes in organisational structure or to the products and service
offered
- External factors such as changes in legislation, changes in competitive practices, market
developments or technological innovation
- Overall performance of the complaints management system

The complaint management process needs to be capable of providing information for complaints
analysis.

© BSI 07-2003 20



Ensure that complaints management is a board-level issue, with regular management reviews of
strategy, policy and performance.
Disseminate information about complaints performance across the organisation and discuss with
staff.
Put complaint trends alongside financial factors as a normal part of management review and of the
staff communication process.
Benchmark complaints management performance against market/industry performance and
trends.
Carry out detailed analysis of complaints to provide input to service delivery, proposition
development and product portfolio development.
Carry out follow-up research with a sample of customers who have complained in order to
understand satisfaction with the process of complaint handling as opposed to satisfaction with the
outcome.
Carry out satisfaction research on a further sample customers an extended period after a
complaint to see if satisfaction has increased as a result of the complaint.
Build an understanding of the impact of successfully managed complaints on increased customer
satisfaction and loyalty.
Monitor lifetime value information for customers who have complained to identify the potential
value of a well-managed complaint.
Use the understanding of the value of a well-managed complaint in resource allocation to dealing
with complaints of different types and from different types of customers.

Around 10% of Financial Service Organisations are starting to monitor the transaction patterns of
complaining customers to see if it is affected.
Only around 15% measure customer retention rates and can therefore understand if complaining
customers become more loyal.

Measure for success
The following can provide good indicators of how well your complaints management is affecting
business performance:

Customer retention and loss trends for complaining customers.
Satisfaction level changes for customers who have complained.
Number of ideas / conclusions from complaint statistics analysis that are passed into product and
proposition development processes.
Average cost per complaint dealt with.
Performance against market/industry performance.

© BSI 07-2003 21


13 Understanding the customer experience of complaints
Complaints management processes will typically produce a high level of reporting and statistical
information. Successful organisations will supplement this quantitative information with a more direct
understanding of the customer experience.

Understanding of the customer experience requires timely and incisive event-driven research around
key moments of truth that customers go through. Mystery shopping can also provide valuable insights
into an organisation’s complaint management.

Staff can even be encouraged to contribute to the process, by making complaints of their own or by
complaining to competitors.

Effort needs to be made to ensure that staff at all levels are clear about which of their particular
activities affect the customer experience.

In order to better understand the experience of competitive finance offers, some staff of a financial
services company were asked to obtain finance from competitors and to report on their experience. In
this way a clear picture was built up of the competitive customer experience, which was fed into the
development of the company’s own proposition and customer experience.

You should focus on your customers and on seeing complaints as positive feedback that produce
positive business results - this is what distinguishes high performing organisations.


Establish a permanent body, such as a customer panel, that regularly provides feedback on
complaints and other customer management issues.
Include dissatisfaction management and complaints in time-based satisfaction research.
Conduct comprehensive event driven research that covers the key moments-of-truth that occur
during the management of complaints.
Wherever possible encourage staff to experience your organisation’s own complaints process as
customers.
Wherever possible encourage staff to experience the complaints process of competitors.
Conduct mystery shopping of the complaints process using specialist independent resources.
Even consider doing this on a comparative basis with other organisations.
Use recording techniques to enable staff to listen to themselves and colleagues in complaint
management situations.
Use all the findings from the customer experience activity to improve the complaints management
system and to refine the proposition.
Compare the customer experience not just of direct competitors but also of other organisations
with whom they deal (utilities, retail, local government) in order to understand general customer
expectations.
Ensure that senior staff spend a proportion of their time dealing directly with complaints

Many organisations have “back to the floor” programmes where senior staff are encouraged to spend
time in call centres handling customer calls or working in branches and retail outlets.


Around 20% of Financial Service organisations have a formal scheme that ensures that senior
managers meet a wide range of customers in transactional rather than social situations, including
dealing with complaint.

© BSI 07-2003 22


65% still do not carry out any form of Mystery shopping of their customer interfaces.


Number of customers attending customer panels.
Number of satisfaction surveys carried out (time-based and event-based)
Number of mystery shopping visits made where a complaint was tested.

© BSI 07-2003 23

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