Changes Sought with Respect to FOS

Key Points
  • The Federal Government is currently undertaking a review of the Australian financial sector’s external dispute resolution (“EDR”) framework, which includes a review of the powers and jurisdiction of FOS.
  • FOS has sought for its dispute resolution powers to be strengthened and its jurisdictional caps increased.
  • If these recommendations are ultimately adopted, it will likely streamline the EDR process for insurers and may result in an increasing number of disputes being referred to FOS.


As you may already be aware, on 20 April 2016 the Federal Government announced a general review of the Australian financial system’s external dispute resolution (“EDR”) framework, to be chaired by Professor Ian Ramsay (also known as the “Ramsay Review”).

On 8 August 2016, the terms of reference for this independent review were released. These terms of reference confirmed that the following three dispute resolution and complaints bodies within the Australian financial sector would be examined as part of the review:

  • the Financial Ombudsman Service (FOS);
  • the Superannuation Complaints Tribunal; and
  • the Credit & Investments Ombudsman.

Importantly for insurers, on 14 October 2016 FOS submitted its key recommendations to the Ramsay Review panel for consideration.

FOS has advised that these recommendations are designed to “remove duplication, expand the range of disputes able to access EDR, reduce complexity, and improve customer certainty.”

In summary (and of particular relevance to insurers), FOS’s recommendations include:

  • an expansion of the monetary limits of FOS’s jurisdiction (currently the FOS can only make a determination which awards a maximum amount of $309,000.00, and is seeking that this limit be reviewed and increased);
  • an expansion of FOS’ small business jurisdiction (currently the FOS can only consider disputes involving claims up to $500,000, and award compensation up to a limit of $309,000. The FOS is seeking that these limits be increased to $2M); and
  • the establishment of a compensation scheme of last resort to deal with the issue of unpaid determinations.

A full copy of FOS’ recommendations can be accessed here:

https://www.fos.org.au/news/media/fos-recommendations-to-further-improve-consumer-outcomes-within-australias-edr-and-complaints-framework/

Of course, at this stage it is unknown whether the Ramsay Review will adopt all, some or none of FOS’ recommendations.

Having said this, considering FOS currently handles approximately 81 percent of the total disputes received by the three above-mentioned EDR bodies, it is likely that FOS’ recommendations will carry some considerable weight. As such, the above recommendations should act as an important and early indicator to insurers of changes that may be adopted in the Australian financial sector’s EDR landscape in near future.

In particular, should the Ramsay Review result in a strengthening of FOS’ powers and an increase to its jurisdictional limits, one would expect to see a corresponding increase in the number of disputes being referred to FOS by consumers, as well as a general streamlining of the EDR process. Insurers would be well advised to plan ahead, and consider the potential ramifications for their internal dispute resolution and claims management processes in the event changes of this nature are ultimately implemented.

The Ramsay Review is due to report to the Federal Government by March 2017. Stay tuned to our blog for updates regarding further developments.

Post by Susannah Fricke

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