By Craig Oliver, is a Financial Services expert at PA Consulting

It’s widely accepted that onboarding new customers is less efficient and more costly than keeping an existing customer, but many banks and insurers continue to fall short of great complaints handling.

When a customer feels the need to complain about their bank or insurer, it often means something’s gone drastically wrong. But such moments don’t have to be relationship-ending. A great complaint handling experience can win back customer trust.

Why are so many firms falling short?

Data from the Financial Conduct Authority (FCA) for the second half of 2021 shows complaints fell to the lowest level since 2016. Yet the number of upheld complaints was up, hitting nearly 60 per cent. Cases that needed the Financial Ombudsman Service to step in also climbed to 37 per cent. While the number of complaints that took longer than the eight-week regulatory limit to receive a final response remained around 79,000.

So, while the overall experience across banking and insurance has improved in recent years, customers that do have problems are finding it harder to get a resolution. There’s certainly more work for firms to do to meet the expectation for a timely redress system outlined in the FCA’s 2022/23 Business Plan.

In our experience across the financial services industry, the most common challenges in delivering a great complaint experience are:

• Inefficient operating models with highly manual processes that have made adaptation to new ways of working, such as the switch to hybrid working, tough, leading to lengthy resolution times and high levels of staff attrition
• Under-investment in IT infrastructure, with limited use of artificial intelligence (AI) and other advanced tools to support decision-making
• The staffing of complaints functions with inexperienced people who receive limited on-the-job training and few opportunities for career growth, making retention difficult
• Poor customer journeys, most of which are offline
• The increasing role of claims management companies that employ legal professionals who make it harder to hear the customer’s voice and resolve the complaint.

How banks and insurers can overcome these challenges

The FCA’s ongoing consultation on the Consumer Duty is defining a paradigm-shifting piece of regulation that will raise the bar for interacting with customers.

While the final details of the Consumer Duty requirements won’t arrive until the end of July 2022, there’s an opportunity to act now and get ahead of the regulations. Starting today will energise complaints management, which will help build a function that’s ready for the Consumer Duty and tackle the roots of customer issues by understanding the cause of complaints.

Having reviewed the outputs of the initial consultation on the Consumer Duty, there are three ways banks and insurers can start to build a great complaints management function:

1. Rethink operating models and processes: Firms need to focus operating models and processes on resolving complaints earlier in the journey by identifying and minimising inefficiencies, improving operational decision-making and embedding organisational agility.

Achieving this requires aligning the organisation to the customer journey. It will also require complaint resolution pathways where each step adds value, removes pain points, or cuts inefficiencies, and will need simple operational management systems that improve decision-making, workflows and operational planning.

To do this, firms need to create a structured transformation programme that focuses on designing and implementing a new operating model with simplified and standardised resolution pathway processes and new ways of working. Prior experience helping a financial firm with this involved setting up a new first line complaints and triaging team, aligned by standard resolution pathways. This team is designed to resolve simple complaints quickly and triage more complex complaints that require investigation by the second line complaints teams.

The resulting operating model and process changes reduced direct FTE costs by 25 per cent, the complaints backlog by 33 per cent and resolution times by 30 per cent. It also sparked a tenfold increase in first touch complaint resolution rates within six weeks of implementation.

2. Training people is vital: Training and guidance for complaints handlers is rarely a focused activity. Investing in advanced training that teaches the processes and methods to resolve a range of complaints across products, and developing effective decision tree aids, will enable complaints handlers to consistently get decisions right first time.

Moving from a model in which complaints handlers are specialists in one product type or complaint category to one in which they can resolve complaints across products and complaint types in multi-disciplinary teams will also help firms respond to changing complaint volumes, and types, faster and more effectively.

The effectiveness of this can be evidenced in work we did with a client who had experienced a surge in complaints and were experiencing operational challenges. Implementing these new ways of working contributed to ten times more first touch resolutions and a 20 per cent reduction in complaints handling times.

3. Lean on innovation and technology: The FCA has been considering how to measure the fairness of complaints resolution, so it’s important for firms to be able to prove the consistency of their resolutions.

Codifying the optimal complaint resolution pathways, and embedding technology to support decision-making, will enable firms to reach consistently fair outcomes and improve transparency and operational efficiency.

A great example of this is a firm who needed assistance with the design and build of a redress guidance decision tool. It consisted of structured decision trees and calculation functionality that helps complaints handlers assess redress outcomes in a consistent and fair manner. The new tool has improved customer experience and brought operational efficiencies that delivered significant savings in redress costs.

A great complaints process will benefit customers and the business

The Consumer Duty will require firms to be much more proactive in their engagement with customers. In turn, this will give banks and insurers more opportunities to retain customers, even in the wake of problems.

By rethinking operating models, increasing support for complaint handlers and leveraging technology, firms will be able to transform their complaints handling approach to the benefit of their business and customers.