Sam Dunn: 'Sorry' won't do when customers are mistreated

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The mea culpas have begun. "[We] very much regret what has happened"; "reviewing all complaints"; "ensure no customers have been disadvantaged".

The guilty party forced to serve up this steaming plate of apologies is Aegon UK, owner since 1999 of the Guardian Assurance life company (and a sister business). Its misdemeanor? Guardian mishandled thousands of customer complaints about endowment policies over a two-year period.

"Systemic flaws", said City regulator the Financial Services Authority (FSA), were to blame. How about "brass neck" instead?

Following a change in the complaints-handling procedure at Guardian, the proportion of grievances upheld plunged in a remarkably short time from 71 to just 22.6 per cent.

I'd like to bet the architects of this critical change were given a pat on the back - that's the spirit, keep the hordes at bay - and congratulated for protecting the company's bottom line.

Thankfully, plenty of those customers who were wrongly rejected took their grievance to the Financial Ombudsman Service instead. Here, complaints were dealt with properly; many were upheld and due compensation then belatedly worked out.

To be fair, Guardian did revise its complaints-handling systems more than a year after the original changes were introduced. When it did so, its "complaints upheld" percentage rose back up - this time to 61 per cent.

However, its earlier practices were rumbled only when the regulator dropped by as part of a long-term project on endowment complaints. No courageous decision was taken to come clean of its own accord.

And no wonder: the punishment meted out last week was a £750,000 penalty from the FSA.

Some will contend this isn't nearly enough - that it's pocket money to a financial services giant such as Guardian's owner, Aegon UK. Indeed, the consumer organisation Which? says the FSA should have gone much further.

"The regulator should have made a real example of this company and imposed a record-breaking fine for poor complaints handling," a spokesman argues.

If the FSA is serious about enforcing good practice, he goes on, the companies that treat customers "with such blatant disregard" need to be hit hard.

I have some sympathy with this view but trying to play the numbers game over the size of financial penalties can lead to a sorry process of indignant appeals, revised fines and both sides ultimately claiming some sort of victory - as was the case with the FSA and Legal & General last year in their dispute over endowment mis-selling.

What really sticks in the craw is the revelation, according to the FSA, that Guardian was "aware in advance" that its initial changes to endowment complaints handling would do it a huge favour at customers' expense.

Which? says this demonstrated "contempt" for both customers and regulator, and I'm inclined to agree.

For this, no apology will suffice.

To design a system that wilfully sends customers and their genuine complaints packing smacks of a breathtaking arrogance.

The financial services industry forever claims to be cleaning up its act. But, too often, its actions appear no more than empty gestures.

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