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Nic Cicutti: Are the PPI pests really harming IFAs?

About an hour ago, shortly before I began writing this column, my home phone rang. I have been expecting an important call, so I raced through the house, almost tripping over the dog in the process, and managed to grab the receiver in time.

“Did you know that you may be entitled to compensation if you have been missold PPI?,” a disembodied voice recording informed me, just before I slammed the phone down in frustration and rage.

Like increasing numbers of consumers, I am plagued by PPI compensation cold calls. Even more annoyingly, not only are these calls pointless – I would never have taken out PPI in a million years – but the scope for con-merchants has grown exponentially.

Years ago, scandalously obstructive complaint systems operated by many insurers, as proven by large FSA fines against some of the worst offenders, coupled with a far from user-friendly Financial Ombudsman Service, meant claim companies could claim to play a small but useful role.

Their potential expertise meant consumers who truly did not understand what the actual issues were with the products they had been sold, could get some help and advice – albeit at a high cost.

Today, however, the picture is different. As my fellow-columnist Alan Lakey aptly describes them, this new breed of cold-callers is a “pestilential nuisance”.

Alan argues these calls are more than that. If they manage to snare the “right” complainant, there is the potential for an IFA to face a large compensation claim.

The key issue, it seems to me, is of how likely that scenario actually is. Alan’s conclusion, a carefully constructed house of cards over several recent columns, is that the problem is a serious one and that ultimate fault likes with the “too easy” FOS complains system and absence of a long stop for financial adviser product sales.

A few weeks ago, Alan described in Money Marketing how he met with the Ministry of Justice on this issue. He told of one fishing letter sent to an adviser, which asked for information about “any company which might have arranged a PPI plan”. Irritating as this letter probably was, one is left wondering why a one-sentence reply saying “I did not transact a PPI sale for this client” would not have sufficed.

In another case, a claim company “sent a truly offensive letter which has shaken the adviser so much that he is planning to exit the industry”. That must well have been an inconceivably vile missive, far more insulting than the comments regularly posted at the bottom of my columns in Money Marketing, which have over several years not deflected me one small jot from writing what I do.

Ironically, it was this paper’s own editor Paul McMillan who, writing in the February/March issue of Ombudsman News, pointed out the truth in terms of how claim chasers really affect IFAs.

Paul wrote: “Of the 3,000 or so complaints referred to the Ombudsman Service about IFAs last year, around a quarter were brought by third parties on behalf of consumers. Of these, 30 per cent were brought by claims managers compared with 20 per cent brought by other IFAs.

“As the complaints generated by claim management companies were skewed during the year by a small number of companies focusing on Keydata and Arch Cru-related issues, we could soon have a situation where more complaints about IFAs are generated by other IFAs than by claim managers.”

The latest FOS figures show that the number of complaints against IFAs has now fallen to about 2,600, of which about 1,200 are unsuccessful.

I accept that an IFA is not automatically at fault simply because the FOS has found against him or her. But on balance that tends to be the more likely scenario. So let’s focus on the cases where the IFA won. Based on Paul’s statistics, this could be taken as indicating that up to 90 unsuccessful claims against IFAs were brought to the FOS by a claim management company.

Except I do not believe the true figure is anything like that high. My hunch is that claim companies are like any other organisation and pick easy-win cases where they can. Even for them, there is a cost, admittedly lower than an IFA’s, to making an unsuccessful claim. Moreover, the overall numbers of their complaints are too few to indicate a genuine scattergun and random approach.

So where does that leave Alan’s allegations in Money Marketing? The chances are that barely more than a dozen or two cases, if that, are genuine causes for alarm for IFAs as far as claim chasers are concerned.

By “cause for alarm”, I do not mean they give rise to compensation awards. They might have the potential to generate the much-loathed £500 FOS adjudication fee. Except they won’t, because as Alan admits: “This will be increased to 25 [free cases] shortly.”

Alan’s tear-jerking final focus on poor retired IFAs facing expensive bills about sales that took place more than 10 years ago following injustified complaints by claim chasers would be more effective if he could tell us how many such cases there have been in, say, the past three years.

My guess is none. But I am sure he will put me right. Anyway, must dash, my phone is ringing…

Nic Cicutti can be contacted at


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. You have a ‘home phone’, that is fixed to a receiver? Is this an article thats been taken from the archives, circa 1998?

  2. Nic, whilst reading your comments on this, in the main i agree with your assessment, although I must say I find your whole tone rather aggressive and confrontational, but hey that’s what sells papers!

    However I feel you are missing the point. we are an IFA who have in the past, and now if appropriate sold ASU to clients to protect mortgage payments. This has proved invaluable for some.

    We have however found ourselves in receipt of around 14 complaints from claims companies re PPI. At least 3 of these cases where for clients who didn’t even have this product, and 2 where they had made a successful claim for benefits from the product.

    The correspondence from the claims company are utter rubbish is some cases and extremely aggressive in others, one recently from a firm of solicitors had 34 allegations of miss selling contained within it, the client had no PPI!!

    My point is two fold. Firstly we have to deal with these at a time when are business are struggling, we are taking exams and when our industry is going through major change.

    Secondly, although we respond to the claims company, offering evidence of no wrong doing, they then take the case to the FOS, where there is obviously no case to answer. This is then, as in our case 100%, rejected by the FOS, BUT, we have still had to pay the £500 case fee, which we can ill afford.

    So I thing your response is more journalistic flair than the reality facing the financial industry at the moment, and maybe you should move your sights to politics or something!!

  3. Nic, your words…
    “Except I do not believe the true figure is anything like that high. My hunch….”

    As a journalist is it not your responsibility to actually do some solid research and firmly disprove Alan’s assertions rather than castegate him over a hunch.

    This is a real problem, is tantamount to fraud in many cases and yet it is the IFA/ adviser who is being punished by having to deal with vexacious claims and the financial penalty of a potential FOS fee.

    You just had to get off your bottom to answer the phone. For us the time we are spending is considerably more.

  4. @Nic Cicutti – Nic, perhaps I didn’t make my concerns as clear as I should have.

    The PPI deluge is the more obvious example of dirty snouts feeding at the trough. The flipside is that these parasites are already digging around looking for other dupes and opportunists who they can persuade to sign authority forms and allow fraudulent or vexatious complaints.

    These bottom-feeders have designed their routines around a system that was designed to assist consumers. It was never intended for third-party fraudsters to take advantage of with their sly promises and scandalous assertions.

    Fraud, Nic, fraud.

  5. Derek Bradley ceo PanaceaIFA 26th July 2012 at 7:33 pm

    The moral compass has broken.

    It seems that everyone is at it these days, there seems to be no shame any more in being accused of lying as long as it means you can get what you want, when you want, from who you want!

    Parents are found lying in 2011 to get their children into their school of choice; civil servants are accused of lying to Parliament over the Goldman Sachs tax bill (although I am sure that the lying track record of some politicians has influenced setting the bar at a new low for this to happen).

    What is it about the British psyche that leads otherwise sane, sensible people to lie and in may cases quite big time? Science is trying to learn more to help counter the opportunist idiot that lurks within with lie detectors, face scanners and voice recognition software but still has a way to go.

    So when does that little white lie turn into something darker that will, if it works, result in considerable sums of cash being collected as the individual “passes go”.

    Researchers have found that the average Briton tells, on average, four lies every day. But I suspect that researchers would have some way to go to beat the insurance industry for finding opportunistic master-classes in the subject of fraud.

    In 2009 fraudulent insurance claims hit a record high of some £730m with more than 100,000 fraudulent claims made and yes, the recession was blamed.

    Dishonest home insurance claims were the most common types of fraud and in a separate survey carried out by YouGov for the ABI, stunningly 20% of respondents said they would not rule out making a fraudulent claim in the future.

    David Hertzell, the Law Commissioner leading the England and Wales consultation project on insurance claim fraudin July 2010 said: “insurance fraud is relatively common and should be discouraged. But the law we have for dealing with it is confusing and contradictory. If the law is to act as a deterrent, it must be clear and easy to understand.”

    False claims managed to plumb new depths in 2011 for sheer stupidity.

    Take for example the recently convicted con artist Julie Pullman now serving 38 weeks in jail. She was sent to prison at the end of September for defrauding her pet insurance company of some £37,000. In this case though, she had invented the dogs, all eight, and their injuries. Not content with that she then faked the vets’ bills — even having a special stamp made up at her local stationery store to make the invoices look “kosher”. In the end, she was rumbled after her insurer, RSA, on a hunch that all was not right, called the vet only to get through to Ms Pullman instead.

    Or what about a case in November of a British man accused of faking his own death as part of a £1.25 million life insurance fraud. Authorities had been searching for Hugo Sanchez a.k.a. Alfredo Sanchez, for six years. He was accused of fraud after police allegedly found his fingerprints on his death certificate.

    Life assurers are not immune. They are finding an increasing problem with clients who either fake disability to make a claim or despite having a clearly fraudulent claim for CI dismissed for blatant non-disclosure then take the case to the FOS who exert, some may say, unfair pressure on the company to pay out despite clear evidence of client wrongdoing- lies in fact.

    IFAs frequently see fraudulent attempts at gaining compensation. These days’s the claims will often focus on miss-selling of some sort that are driven by ambulance chasers. Indeed we looked at some examples last year.

    Our survey of some 300 IFAs in April 2011 would suggest that the FOS needs to look closely at dealing swiftly with fraudulent claims, particularly as 90% of survey respondents thought that FOS rules place IFAs in a disadvantaged position from outset.

    Some 97% of respondents felt that a claimant should have to produce all relevant tangible evidence to support the claim they make before the case can be considered within FOS jurisdiction and that a staggering two thirds of respondents had experienced false or manufactured claims in an attempt to gain compensation, often through claims management firms.

    The FOS has a very important role to play both in society and the industry and they do some good work that may not always be appreciated. Time and again we hear about successful claims of miss-selling, mostly by banks it must be said, yet complaints against IFAs accounted for just 1.5 per cent of all FOS cases in 2010/11, down from 2 per cent in 2009/10. Of these 53% were upheld but this statistic was distorted due to a very large number of the 2010/11 complaints being made against one firm- Towry with 345, a hundred more than Barclays who came second.

    So we hear very little about the 47% of rejected complaints that shall we say could be “choc full of lies”? Perhaps an FOI request would reveal the extent of false accusations against IFA firms?

    IFAs take complaints seriously and will always be happy at a rejected outcome but dismayed at the cost and stress involved plus the time spent proving innocence when the complainant has failed to prove guilt twice- once when the complaint was rejected by the firm and a second, case fee generating stage at the FOS.

    With this in mind, it is interesting to look back to issue 21 of the Ombudsman News from October 2002 on the subject of fraudulent and dishonest claims.

    The then Ombudsman, Walter Merricks, stated that “fraudulent and dishonest claims are a major problem for the insurance industry and fraud is alleged in a number of the cases we see. These can be difficult to assess. To establish that fraud has taken place, some concrete evidence of lies, inconsistent statements or acts of deception must be present. The fact that members of a firm’s staff are personally satisfied of the claimant’s bad faith is not sufficient proof of dishonesty’.

    But surely it is a starting point?

    He went on to say, “The essential components of fraud are intent to deceive and desire to induce the firm to pay more than it otherwise would. Establishing these points can require an analysis of the claimant’s motives. Inevitably this is a largely subjective exercise. Where a firm suspects fraud, it should make its views known to the customer, who can then respond to the allegations. We are unlikely to support a firm’s position if, instead, it uses a separate and spurious reason to justify rejecting a claim”.

    Where fraud is suspected by a firm, a process should exist within the regulatory framework to deal swiftly with it yet it seems time and again that despite clear evidence being available the process either cannot or will not see it.

    As Douglas Adams famously said, “If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands”.

    With fraudulent complaints the same logic applies.

    Perhaps the time has come for IFA firms to bypass the Ombudsman process where clear evidence of fraud exists and has evidentially been demonstrated to the complainant. Firms could go to the police or even consider the practicality of resorting to the courts themselves. The immediate effect of such a move would be to take the complaint out of FOS jurisdiction as the FOS cannot deal with cases that are subject to legal process. But such action would no doubt fall foul, perversely, of TCF rules.

    Small IFA firms are particularly vulnerable to opportunist claims. In fact from our research on the subject, many small IFAs will confirm that they see the FOS as home of choice for the opportunist complainer or ambulance chaser, their motto being “nothing ventured, nothing gained”.

    This may be why the FOS are increasing staff by a third over the next year. In 2012/13 staffing costs are expected to total £149.4m.

    But remember the wise words of Rolling Stone (not Tenet) Keith Richards who said, “In the business of crime there’s two people involved, and that’s the criminal and the cops. It’s in both their interests to keep crime a business, otherwise they’re both out of a job.”

    It is regulation presenting an unchecked opportunity that represents the problem. It can transform someone into a liar.

    Dealing with fraud costs by way of time, emotion, stress and money. It is not a victimless crime and those caught “at it” should pick up the tab in a very expensive and draconian way.

  6. Exasperated Me 27th July 2012 at 4:28 pm

    “I accept that an IFA is not automatically at fault simply because the FOS has found against him or her.”

    Do you really Nic?

    I find that unacceptable, an affront to natural justice.

  7. Financial Ombudsman Service,
    South Quay Plaza,
    183 Marsh Wall,
    E14 9SR

    Dear Sirs

    RE Mr Jarkman’s Complaint about Anonymous IFA Ltd.

    Thank you for your letter of the 7th December 2002. As requested I attach a copy of our file.

    This is all the information we have relating to this case.

    We accept that your office does not require evidence as client’s hearsay is profoundly more accurate and recollection of technical issues by an admitted non-technician of events more than 10 years ago, without supporting documentation is irrefragable, prima facie evidence. Our own supporting documented evidence must therefore be a complete fabrication.

    We accept that we must now assume “the position”, await your shafting and only ask how big a smile would you like us to fake, whilst you defile us, publicly.

    I wait for your reaming with trepidation.

    Yours sincerely,

    Captain Spivvy
    Wide Receiver
    Anonymous IFA Ltd.

    PS FYI
    Jarkman – a habitual writer of begging letters
    Irrefragable – irrefutable, undeniable.

  8. Hector's Pants 27th July 2012 at 5:30 pm

    felt a little light hearted whinging is needed.

    We all talk about our views of the future of the industry and some paint it rosy (my glass is half full) and some whinge about the gloomy prospects (my glass is half empty).

    Unfortunately there are other variables in our industry.

    The Regulator – out of touch with working practices and a juggernaut gaining momentum all the time – what will happen when Howard Davies is replaced? The new Demi-God has already stated he intends a shakedown. (Let’s all play drinking games and I’ll make up the (most complex) rules, retrospectively if I have to, and drink from your drinks, or spill them, or whatever I like.).

    The Media – no responsibility, no memory or ability to recall what they themselves said but all too ready to snipe from sidelines and claim they are always right. (You don’t want to drink that – you want to drink this).

    The Consumers – these fall into two classes:

    The client – Yes, I’m ready to listen to what you have to say Mr Adviser (I’ll have what you’re having) and;

    The goldfish – I can’t remember you telling me about there being a risk attached to this – I know my rights – I’ll complain and if you don’t like it it’ll cost you. (Did you spill my pint?)

    The ambulance chasers – (He did spill your pint, I saw him and he owes me for one as well).

    What do I make of all this? Well, I for one would like to sit quietly and drink my pint with clients but it’s getting a little crowded, they’re all jostling me and my client and the media and the Regulator want to get everyone in a Conga. I’ll never get the chance to enjoy a pint again if this carries on.

    Richard W

  9. Finally Cracked 27th July 2012 at 5:34 pm

    With the deluge of complaints (unjustified) I finally gave in to temptation and wrote what I wanted to say. The case was a pre ‘A’ Day sale, the complaint was a combination of fabrication and selective recollection. We rejected it and the response to our rejection letter from the client was acerbic to say the least.

    I didn’t send it but it made me feel better – I hope it raises a smile for you:


    Dear ……..

    Thank you for your letter of the 9/9/03 we were running out of toilet paper anyway.

    I would like to congratulate you on your use of English. This must have represented a departure from your usual method of communication. I understand that amoeba normally do so by chemicals. Thank you for at least allowing us to recognise your existence and appreciate the imagination required for your fabrications.

    In recognition of this we have awarded you the celebrated “Hypoxemic of the Month” award which entitles you to a free consultation with one of our advisers. There is usually a small audience for this but previous winners have not complained (intelligibly) about the missiles.

    I wave my bottom at you like a hamadryas baboon in recognition of the threat your assertion to take matters further represents.

    Doubtless we will hear from you again and I await your offerings with a wry smile.


    See, I told you I had finally cracked!

    Oh, Brian – the FSA ‘phoned me today about the cooling off notices etc. they’ll be emailing me today or tomorrow. They ‘phoned to see who we were regulated by historically. They thought we were LAUTRO regulated in the past for some reason. Go figure?


    Richard W

    PS hypoxemia is the medical term for brain death

  10. Nothing changes.

    Well, apart from the name of the regulator….

  11. And

    The complaints about PPI have ended up as claims for something quite different, take waiver of premium (WOP) for example, income protection (PHI), ASU… so pensions, CIC, WOL…


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