Should you believe the ombudsman?

ARE insurers getting better or worse? Some apparently good news from the insurance ombudsman last week may not be as significant as it seems.

The ombudsman, who arbitrates on disputed insurance claims, noted a fall of more than a fifth in the number of cases coming to him last year, the first fall since the scheme was set up.

He suggested that insurers could be giving policyholders a better claims service - paying out more quickly and more to policyholders' satisfaction: that they are becoming more "customer conscious" and "user friendly", even that they have undergone a "culture change". Well, maybe.

But the reduction in complaints reaching the ombudsman could also reflect the reduction in insurance claims generally last year, rather than smoother handling by the companies. Fewer big disasters last year meant fewer claims on buildings and contents insurances, says the ombudsman.

In addition, while complaints may have fallen, the size of awards by the ombudsman rose. The scheme paid out a record pounds 10m last year to more than two thousand people.

Great if you were one of the recipients inasmuch as most awards by the ombudsman are new money - most complaints to reach his office involve no payout offer at all from the insurer. But, again, bad news in the sense that it means insurers have been trying to hang on to even more money rightly owed to policyholders.

Another point is that the average time taken for the ombudsman to process claims has also gone up to five months, from four. That means delays for policyholders in getting their rightful dues. And again it could easily reflect insurers lack of co-operation.

Not that the ombudsman, who is paid for wholly by insurers, should simply be seen as their apologist - a clever invention of the insurers to reassure politicians inclined to consumerist legislation.

The insurance ombudsman should be applauded for the simple reason that he claws money out of insurers that wouldn't otherwise be forthcoming, his services are free to claimants and you still keep your right to go to court if you're unhappy with his ruling. But as to whether insurers are getting better - I think it's simply too early to tell.

p Letters to the Your Money pages are welcome, and can be a very useful source of the nasties inflicted on consumers by the world of finance. They are certainly read, but - unfortunately - I can't reply individually. And please don't enclose anything that you want returned.

p Steve Lodge, Personal Finance Editor, Indepen- dent on Sunday, One Canada Square, Canary Wharf, London E14 5DL.