This time last year, FSCS published our strategy for the next five years – Vision for a Confident Future.
One year on, it’s time to take stock of progress and set out how we intend to take that vision forward in 2015/16. That is what we have done in our Plan and Budget published today.
A key obligation of the leadership of any organisation is to ensure that it’s fit to face future challenges.
You might think that obligation is less pressing for a business like FSCS which is a monopoly supplier of a public service: in our case the provision of a compensation scheme for financial services.
If so, you could not be more wrong.
We must invest in our service in order to remain credible to consumers now and to be able to respond to future crises. We must invest in order to deliver value for money.
That’s why the centrepiece of our plan for next year will be the implementation of a new claims handling process – Connect. It aims to deliver on both points.
Let me explain.
FSCS currently operates not one, but two, claims handling processes.
There is the modern process we established in January 2011 to pay-out depositors in failed banks, building societies and credit unions in seven days. It runs on an up-to-date platform and demands nothing of consumers, not even an application. They don’t have to lift a finger to get compensation after changes to our systems and the rules set for us.
And then there is the paper-based process, supported by an out-of-date platform, with which we handle most other claims. So two different claims handling processes; two different experiences for our claimants; two sets of costs.
The investment we’re making will bring all our claims handling onto the modern platform we established for fast pay-out.
That will bring with it a number of benefits.
It will allow consumers to submit claims and supporting evidence electronically using an online system. Consumers will also be able to check the progress of their claims online.
These are facilities which most of us take for granted with most financial services.
Where consumers prefer to submit applications or evidence on paper, they will still be able to do so, but we have in place a scanning service to ensure that we can still operate a paperless process.
Importantly, we expect to halve the time it takes to handle many claims.
We shall also share the new platform and process with the outsourcers who handle the great majority of our claims. We use outsourcers because this is the most efficient way of managing a volatile and unpredictable workload. But our ability to work with outsourcers to gear up quickly to deal with major failures is currently inhibited by our current, clunky paper-based process. The new process will remove that constraint. Consumers will benefit from this.
And because we and our outsourcers will be using the same claims handling platform and operating without paper, the process will offer better value for money and will be better controlled. We are aiming to achieve savings of around £8m over the next five years, assuming claims volumes at roughly existing levels.
So this is a major investment which will, I hope, underpin FSCS’s service for many years to come and yield continuing benefits in the shape of a better service for consumers, greater resilience in the face of changing demands and better value for money.
Connect is due to go live in April and will be rolled out over time – somewhat later than we planned and at somewhat higher cost. However, we have managed these higher costs for the most part within our budget for this year. Next year, the cost to levy payers of running FSCS will reduce by around £5.5m.
We hope you will take the opportunity of the consultation now under way to comment on our Plan and Budget, and to ask questions. We are always ready to account to levy payers and the industry for what we do and how we do it.