Boosting efficiency and enhancing customer outcomes

FSCS has been on a journey to transform the way we operate, shifting towards a hybrid operating model that will allow the scheme to continue to deliver a trusted compensation service that is fit for the needs of customers today and into the future.  

Sarah Marin, our Chief Customer Officer, tells us more about how FSCS is changing the way we handle claims to boost efficiency and enhance customer outcomes.

How have the claims that FSCS receives changed?

Customers come to FSCS from all walks of life with claims about many different financial products. Over the years we’ve seen a change in the mix of claims that come to us. 

In 2019, 31% of our claims were what we would class as straightforward, for example mis-sold payment protection insurance (PPI). That number is now approximately 5%. Meanwhile, we’ve seen the proportion of more complex claims increase from a third to two-thirds. These claims are mainly linked to customers’ retirement savings, for products and services such as regulated financial advice, self-invested personal pensions (SIPPs) and investments. These make up some of the most sophisticated claims that FSCS handles and can take longer to process.

The long-term nature of retirement saving can mean many customers are not aware that they may be owed compensation until many years after the financial harm they experienced occurred. This in itself can add complexity to their claim as it may be more difficult to gather the evidence needed from third parties as more time passes.

Helping people to get back on track when their financial firms go out of business is at the heart of what we do. Our new operating model will allow us to focus our in-house expertise on more complex claims and calculations, bringing in support from our partners for some of the more straightforward claims or activities and scaleability when needed, for example if we needed to respond to a large deposit taker failure.

Why is FSCS changing the way it handles claims?

We believe increasing our in-house expertise and customer service support is the best way to manage the sophisticated claims and enquiries that increasingly make up a majority of our work.

Our existing claims handling support contracts were put in place in 2017, at a time when the mix of claims coming to us was very different. As these contracts reach their end, we’ve been proactively adapting our service to ensure it continues to meet the changing needs of our customers.

We’ve laid the foundations for this over the last year, and in April we opened our in-house customer contact centre, welcoming 16 call centre specialists and call handlers to the team. This marked the first key milestone in our broader strategy to transform how we operate. We also continue to build our in-house capability and since our transition began we have onboarded 47 new claims handlers.

Having the right mix of expertise and support to handle the volume and variety of claims coming to us will help drive efficiencies and strengthen our control over our customer experience, while continuing to deliver our service in the most cost-effective way for the levy payers who fund our service.

What does a ‘hybrid operating model’ mean?

FSCS has always sought to flex our resources to meet demand, enabling us to offer a high standard of service, which has seen us maintain a customer satisfaction score of 84% over the last year.

As part of our goal to enhance our service and improve our customer experience, we’re increasing our in-house customer contact and claims handling capability. We will still outsource claims, however our new model will give us the flexibility to allocate our in-house resources more efficiently towards complex claims, for example those involving defined benefit pension transfers. This flexibility will be particularly important during periods of high claims volumes which can be difficult to predict.

In June, following a robust and competitive procurement process, we appointed PwC as the new partner for our claims service. PwC impressed us with their commitment to customer experience and their plans for the transition. The tender they put forward reflected both quality of service and the value they can bring to our customers and levy payers.

Why aren’t you bringing all of your claims handling service in-house?

It’s important to get the right balance of internal and external claims handling support to deliver the best outcomes for customers. The flexible support that our external partners offer means we can process claims in the most efficient way possible, providing accurate and timely decisions to our customers. This flexibility is particularly important during periods when we experience a surge in claims. These can be difficult to predict and may occur when we are dealing with larger firm failures that generate a high volume of complex claims, or for example, when we’re responding to a large deposit taker failure. 

Will current claims be affected as you transition to the new model?

In April, we opened our new customer contact centre in our London office, marking the first key milestone in our transition journey. Customers experienced a smooth transition with no downtime for our contact centre operations. Since opening, the team have handled more than 13,000 calls, over 800 webchats and many more emails, offering customers the first port of call for all their queries. In fact, the first day of operation saw the highest volume of calls we’ve ever received and I’m proud to say our contact centre team handled this with ease.

The wider transition of our core claims handling service also continues at pace. We have successfully recruited 47 in-house claims handlers and we will be operating a dual running period, working with all of our claims partners to prevent or minimise impact on customers during transition.

We expect PwC to start handling FSCS claims from the autumn as part of our phased transition plan. During this time our current claims partners will continue to support us to deliver customer outcomes. Our current contracts end next March and we’re working with all of our partners to ensure successful knowledge transfer is completed during this time. This ‘overlap’ has been purposefully built into our plans to ensure continuity for our customers and the other partners we work with, as we outlined in our management expenses budget for the year back in January.

Will the new model mean customers get claims decisions faster?

Losing money when your financial provider goes out of business can be an incredibly stressful experience. At FSCS, we do all we can to make the process of claiming with us simple and straightforward, so customers can get fair and accurate decisions as quickly as possible.

Timescales will vary depending on the product as well as how much additional data is required from third parties and how quickly they are able to respond. It’s not unusual to see claims processing times fluctuate and recently we have seen these rise, particularly in pensions, as we experience higher volumes of complex claims requiring more evidence to process. Since 2021/22 we’ve seen the amount of evidence we receive per claim increasing by 89%. At the same time, we are dealing with larger and more multi-faceted failures such as SIPP operators that require more time, expertise and resource to investigate.

Giving customers a realistic expectation of how long their claim may take is important to us. Our claims handlers and contact centre team regularly update customers about the status of their claim. Customers can also check this directly through our online claims portal.

Our estimated claim times will likely fluctuate close to the current level in the short term, however we anticipate these will reduce in the longer term as the new operating model is embedded and we continue to invest in improvements to our ways of working which are directly aimed at reducing claim turnaround times.

It's also important to remember that these timescales include the time taken to individually assess a claim, but also any time needed to investigate the firm itself – this work can take many months to conclude. A recent example is the failure of Rowanmoor Personal Pensions. FSCS declared Rowanmoor in default in December 2023, but claims had been accepted since September 2022 to assist with investigations - 15 months earlier. With more than 1,500 claims against Rowanmoor, the decisions being made are having an impact on the average pension timescales.