Treatments vary for medical policyholders' complaints: Sue Fieldman looks at the way insurers deal with unhappy clients

The private health insurance industry pays hundreds of pounds compensation a year to disgruntled policyholders.

The insurance companies have always kept the nature of the complaints and the level of payouts very close to their chests.

But Western Provident Association, the third largest medical fees insurer, put the cat among the medical pigeons when it revealed that since January 1991 it has been involved in 30 complaints to the insurance ombudsman - the final port of call for aggrieved customers.

Of those complaints 12 went in favour of WPA and four in favour of the policyholders. Nine cases were settled by WPA making a compensatory payment before the ombudsman's decision, and the outcome on five is still awaited.

One policyholder was awarded pounds 25 compensation for inconvenience caused by wrong advice, together with pounds 350 because the overseas scheme rules were deemed to be misleading.

A policyholder complained that WPA's presentation of the subscriptions, which offered him a transfer to a scheme with tax relief, did not draw attention to the fact that as his wife was 11 years younger he could have saved money by making two separate arrangments.

Julian Stainton, managing director of WPA, says: 'If we get it wrong, it is fair enough that we have to compensate. We have paid out about pounds 20,000 compensation in total. We regard it as peanuts. To put it in perspective, we pay pounds 1.5m worth of claims every week.

'We positively encourage people to go to the ombudsman if they feel in any way aggrieved. It is not something we resist.'

Bupa, the largest private health insurer, does not belong to the ombudsman scheme. Instead, disgruntled policyholders go to arbitration. Over the past three years 10 complaints have gone there and eight have been won by the policyholders.

A Bupa spokesman said: 'The average payout is less than pounds 5,000. We resolve a lot of things before they get that far.'

Private Patients Plan also uses the arbitration scheme. Ten complaints have been referred to arbitration. PPP has won eight and lost two.

A spokesman for PPP says it uses the arbitration scheme because it is 'well-balanced and fair to both parties'.

Bupa says it is quite happy with the arbitration scheme. But it admits that the scheme does not look at advertising and promotional literature, there is a fee and - perhaps most important of all - both sides have to agree to arbitration.

The Bupa spokesman said: 'If someone wants to go to arbitration we would not necessarily consent. We may not feel they have a case.'

Mr Stainton believes that the ombudsman is the publicly recognised complaints procedure that everyone understands.

Norwich Union has only been in the private health market for about three years. It has also plumped for the ombudsman to decide disputes because 'we felt customers were familiar with the role played by the ombudsman'.

The ombudsman has dealt with nine complaints from Norwich Union customers. All have been decided in the company's favour.

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