Personal customers

Commentary

Context CIS and the bank provide a range of banking, insurance and investment products to more than seven million customers. Whilst CFS has begun to market insurance products to banking customers and vice versa, during 2003, the customer bases and the majority of service channels remained distinct to each organisation. For a number of years, the bank has reported the satisfaction of its current account customers, based upon their rating of service, relationship and ethics, which are customers' priority issues. Follow this link for more information on customers' priority issues. In addition, using MORI Financial Services i data, the bank has previously reported customer satisfaction for other high volume products, such as savings, loans and Visa credit cards, and benchmarks this against the industry average. This year for the first time, customer satisfaction research is being reported for CIS' major product categories (motor insurance, home insurance, life assurance and pensions). Additionally, MORI Financial Services' satisfaction data is provided for CIS' motor, home, life assurance and pension customers. Taken together, the products for which MORI Financial Services data is available account for 76% of all CFS accounts/policies held by customers, by number.

Social inclusion A critical component of social inclusion is the need for good access to routine banking facilities, described as 'financial inclusion'. Financial Services organisations can play a role in tackling financial exclusion through the provision of basic banking facilities and insurance products. CFS discloses the profile of the customer bases of several key products - bank current accounts, bank loans, CIS pensions and CIS life assurance - on the basis of Experian's MOSAIC classification of Great Britain households.ii A comparison with the population indicates that CIS has proportionately more customers in MOSAIC groups C 'Blue Collar Owners' and D 'Low Rise Council' and fewer customers in groups E 'Council Flats' and F 'Victorian Low Status'. A comparison with the population indicates that the bank also has proportionately more current account and loan customers in MOSAIC group C 'Blue Collar Owners' and a lower than average proportion of customers in group E 'Council Flats'. The substantial increase in the number of customers holding the bank's 'basic' bank account, 'Cashminder' (up 76% to 24,581 in 2003), has had only a marginal impact on the MOSAIC profile of the current account base, in the groups where increases might have been expected. The increase in Cashminder account holders may be attributable to the launch of Universal Banking Services (UBS), which became available through the Post Office in April 2003. This aims to facilitate the direct payment of state benefits. The bank's Cashminder account was one of a number of 'basic' banking products that was intended to assist with this initiative. In support of the launch of UBS, the bank briefed customer service staff to ensure that they could respond to customer queries. As part of the bank's ongoing programme to improve access to banking facilities through Co-op shops, 559 cash machines were installed in Co-op shops throughout the UK in 2003. Follow this link for details of the bank's cash machine installation programme. Both CIS and the bank continued to promote financial inclusion through their involvement with the Credit Union movement. This included sponsorship of the Association of British Credit Unions' (ABCUL)iii national and regional conferences in 2003, promotion of the PayPoint network to credit unions iv and through the considerable involvement of staff members in credit union activities. Follow this link for details of the bank's support for credit unions.

Customer satisfaction - CIS 87% of customers said that they would be likely to recommend CIS to a friend, of whom 62% said that they would be very likely to make such a recommendation. 70% of customers said that they considered their relationship with their agent to be 'excellent' or 'good'. Research revealed a low level of awareness (30%) of CIS' ethical and sustainability commitments. However, 85% of those aware said they were satisfied with performance. It is envisaged that the project to establish a customer-mandated policy for CIS' approach to Socially Responsible Investment will increase awareness of these issues in 2004. . Follow this link for details of CIS' SRI Policy development  MORI's surveys show that CIS' motor insurance, home insurance, life assurance and pensions customers (which represent 68% of all CIS policies) are more likely to be very satisfied than the market average. CIS received external recognition for its products and services at the Guardian Observer Consumer Finance Awards 2003, collecting the award for Best Car Insurance Provider and a runners-up place in the Best Home Insurance Provider category.

Customer satisfaction - Bank Current account customers' overall satisfaction with the bank has increased markedly during 2003, with 88% rating their relationship as 'excellent' or 'good', of whom 34% described it as 'excellent' (2002: 24%). 87% of customers state that they would be likely to recommend the bank to a friend (2002: 82%). There has been a slight decrease in customer awareness of the bank's ethical and sustainability positioning, from 79% in 2002 to 76% in 2003. Of those aware, satisfaction has remained constant at 91%, but there has been a 17 percentage point increase (to 50%) in the number of customers stating that they are 'very satisfied' with the bank's ethical and sustainability performance.  MORI's surveys show that Co-operative Bank current account, savings, credit card and loan customers (which represent 96% of all bank accounts) are more likely to be very satisfied than the market average. According to MORI, 43% of The Co-operative Bank's current account customers are very likely to recommend the bank (2002: 56%), compared with the market average of 32% (2002: 33%). The bank received external recognition for its products and services at the Guardian Observer Consumer Finance Awards 2003. The bank was runner-up in the categories of Best Mortgage Provider and Best Independent Financial Adviser, and was short-listed in the Best Current Account (off-line) category.

Customer satisfaction - smile Research undertaken amongst customers reveals that smile is exceeding the expectations of the vast majority, at a time when their expectations are increasing. Competitive interest rates and the convenience of the smile banking experience continue to be cited as the two main reasons for smile account opening. There has been an increase of two percentage points (to 36%) in the number of customers who agree that the smile banking experience is 'excellent - I can't praise it enough'. A further 54% (2002: 54%) agree that 'it is good - well above what I expected'. Furthermore, smile customers' propensity to recommend the bank to their friends has increased, with 94% stating that they would be 'likely' to recommend (2002: 90%) - 72% of whom said they would be 'very likely' to recommend (2002: 57%).  smile continues to be the only UK-based bank accredited by the British Standards Institution for Information Security Management Systems. smile received a number of awards in 2003, including: Best Online Bank and Building Society Website (Online Finance Awards 2003); Best Internet Banking Provider; Best Internet Credit Card Provider, Best Internet ISA Provider, Best Internet Savings Account Provider and Best Internet Personal Loan Provider (Your Money Direct Awards 2003); Best Overall Customer Service, Best Online Current Account and Best Credit Card (Guardian Consumer Finance Awards 2003). smile topped Virtual Survey's Quarterly UK league table for electronic banking customer satisfaction three times in 2003, receiving a score of 4.4 in the last survey. This compares with a mean industry score of 3.8.

Complaints - CIS In 2003, CIS received a total of 48,268 complaints (2002: 48,589), of which 30,397 were 'regulated' complaints - i.e. those relating to the sale of life assurance, pensions and investment products (2002: 38,461). Whilst the number of regulated complaints fell by approximately 21%, the number of non-regulated complaints increased by 76%. These changes result from amendments to the complaints categorisation process introduced in 2003. 2003 saw a five percentage point improvement (to 95%) in the number of regulated complaints being provided with a response within 5 days. At the end of December 2003, there were 1,950 outstanding cases, representing 4% of the total number received during the year.

Complaints - Bank The Co-operative Bank was the first high street bank to provide all customers with service level guarantees v covering routine banking facilities; where the bank falls short, it rectifies the error, apologises to customers and pays £15 in compensation. The bank received a total of 12,172 written complaints in 2003. 1,222 (2002: 1,170) complaints were referred to the bank's Customer Care team, of which 160 were issued with Final Responses, enabling the customer to refer the complaint on to the Financial Ombudsman Service. Research shows that, of those customers who had cause to complain to the bank in 2003, 70% felt that the matter had been dealt with quickly and without fuss (2002: 56%).  9% of the bank's current account customers surveyed by MORI in December 2003 had complained during the year (2002: 6%). By comparison, 9% of all other banks' current account customers surveyed by MORI in December 2003 had complained (2002: 10%).

New products and services vi In September 2003, the bank launched its 'Privilege Premier' current account to existing Co-operative Bank current account customers. This account offers a range of banking and lifestyle benefits in return for a monthly subscription. A similar fee paying current account was launched by smile in spring 2003 - 'smilemore'. A further three issues of the bank's Guaranteed Stock Market Bond were released in 2003. The bonds provide a low risk investment - with initial capital being guaranteed - and have the potential to yield returns based on stock market growth. Whilst customers' money is not invested in the stock market, their return is based on 100% of the rise in the FTSE 100 Index. In June 2003, the bank became the first UK bank to offer mobile phone 'top-ups' from its cash machines, a service developed by LINK, the shared cash machine network. CIS relaunched its UK Income with Growth Unit Trust in August 2003, and launched a Corporate Bond Income Unit Trust in September 2003. The Unit Trust invests in a portfolio of investment grade corporate fixed-interest securities and provides a monthly payment. In 2003, the New Business Centre processed 76% of paper applications for new major accounts within 48 hours (2002: 94%). Follow this link for details of tailored co-operative products. Follow this link for details of tailored ethical products. Follow this link for details of tailored ecological products.

Mortgages vii 2003 saw significant growth in the total value of mortgages sold by CFS, all of which include carbon offset features. Follow this link for information on green mortgages. 80 different product offerings were launched onto the market in the course of the year. Early indications of the cross-selling potential of CFS were seen in the number of bank mortgages sold by CIS Financial Advisers. To manage the growth in sales, the bank's Mortgage Services department doubled in size to around 160 staff in 2003. At peak times throughout the year, the volume of business activity was such that CFS could not offer its usual high level of customer service; however, the average processing time has remained relatively constant; at about 3 weeks for most applications, which is in line with the industry average. 80% of mortgage customers are satisfied with their relationship with the bank (2002: 69%), whilst 92% are satisfied with its ethical and sustainability performance (2002: 71%).

Network developments A new bank branch was opened in Belfast in May 2003. The branch offers a full range of banking and insurance products and services. During 2003, the following five branches were refurbished: Bolton, Bradford, Caerphilly, Guernsey and Newcastle Grey Street. Accessibility improvements were made to a further five branches. Follow this link for details of accessibility improvements. No bank branches were closed in 2003. CIS closed Romford Claims Office in 2003 and announced that Liverpool Claims Office would close, and that London and Watford Claims Offices would merge in 2004. Members of staff from Romford were offered work in Bury St Edmonds and Maidstone Claims Offices, and policyholders were transferred to these two offices. 14 District Offices were closed by CIS during 2003, with their administrative workloads being transferred to neighbouring offices. In all cases, the Financial Advisers affected by the closures continued to serve the same area and group of customers. Relatively few CIS customers visit either Claims or District Offices, with telephone and home visits being the preferred way of contacting CIS.

Pensions and investments Following serious concerns about the quality of pensions advice in the late 1980s and early 1990s, the Financial Services Authority placed a requirement on all providers to review their pension sales and make corrections where customers were losing out because of poor advice. CIS completed 99.99% of offers on Phase 2 of the Pension Transfer and Opt-out review in advance of the FSA target, of all relevant cases being reviewed by the end of March 2003. Work is still underway to secure 192 outstanding acceptances to these offers and to implement 234 offers already completed (these matters primarily relate to reinstating members back into their occupational schemes). Following the completion of the Free-Standing Additional Voluntary Contributions (FSAVC) review in December 2002, a year later there remained 62 outstanding acceptances, and of the offers accepted, seven were yet to be implemented. In December 2003, CIS was re-accredited with the Raising Standards Quality Mark by the Pensions Protection Investments Accreditation Board.viii The Raising Standards Initiative focuses on the 'clarity' and 'appropriateness' of customer information and other customer service issues. Re-accreditation followed a thorough examination of CIS' information provision.  Eleven providers, representing 47% of the market as measured by the sales of new shares, have gained accreditation under the Raising Standards scheme.

Mortgage endowments CIS has 138,000 premium-paying mortgage endowment customers, although selling of this product ceased in January 2000. Given the investment climate and changes made to the mix of assets backing these policies (e.g., a reduction in the equity content of the fund), CIS has revised its projection rates from 4%, 6% and 8% to 4%, 5.75% and 7.5% respectively. In accordance with the ABI's categorisation of policies, the revised assumptions have resulted in 53% of premium paying mortgage endowments being classified as 'red' (defined as more than 7.5% annual future investment return to repay the mortgage) (2002: 6%), 31% as amber (5.75-7.5% needed) (2002: 58%) and 16% as green (less than 5.75% needed) (2002: 36%). Over 2,800 complaints were received in 2003 in connection with re-projection communications (undertaken first quarter 2002). By the end of 2003, fewer than 10% of these were unresolved, and invariably these are accounted for by complaints being received towards the end of the year.  The changes in the red/amber/green split of CIS' mortgage endowment policies are consistent with those seen across the industry during 2003, as providers revised downward their forecasts on investment returns.

Industry codes  The bank subscribes to the Banking Code, the Mortgage Code and the General Insurance Standards Council Code. CIS subscribes to the General Insurance Standards Council Code, the Association of British Insurers Code and the Mortgage Code. CFS is authorised and regulated by the Financial Services Authority. In 2003, the Banking Code Standards Board and the Mortgage Code Compliance Board carried out monitoring reviews within the bank. These confirmed satisfactory compliance with the codes' requirements. For each Code, CIS and the bank has an appointed Compliance Officer who liaises closely with the relevant regulatory bodies. Both CIS and the bank are working on their processes and procedures in connection with statutory regulation for Mortgage and General Insurance due to take effect from October 2004 and January 2005 respectively.

Sustainability value analysis

For a number of years, the bank has researched its customer base to gain a better understanding of the importance of its ethical and sustainability policies in attracting and retaining customers. Results indicate, for example, that for 36% of current account customers, the bank's ethical and sustainability policies are the most important reason for opening and maintaining an account. The research also indicated that ethically motivated customers are more likely to have more than one product with the bank and are more likely to recommend than the bank's average customer.  MORI's surveys indicate that fewer than 1% of all other banks' customers open their current accounts for ethical reasons.

Influence and action

Savings In July 2003, the UK Government responded to the Sandler Review (June 2002),ix which looked into medium and long-term savings and recommended the development of "a set of simple and clear savings products accessible to the mass market." CFS has welcomed the proposed product designs and simplified sales processes, and their potential to facilitate wider access to financial services. It has noted its belief that potential customers need encouragement to save, and that the mere availability of simplified products may not, in isolation, be sufficient. The provision of face-to-face financial advice has been advocated, together with a 'Charge Cap' which reflects the cost of advice, control and distribution.

Pensions In May 2003, CIS responded to the Department of Work and Pensions' Green Paper (March 2003)x on working and saving for retirement. The response articulated support for the Government's aim of encouraging greater self-provision through pension reform and centred on the need to simplify the pensions system in order that its complexities do not deter individuals from making financial provision for their futures. It proposed that a combined 'real terms' pension forecast be introduced, which shows the total projected benefits of an individual's current pension provision (both state and private). This could provide a significant motivator for people to review and increase their pension provision. The response also articulated CIS' belief in the powerful advocacy role that could be played by employers, and the importance of further co-ordinated educative campaigns in addressing the issue of pension provision. During 2003 and 2004, CIS co-hosted a series of 'roadshows' in support of the Government consultation. Follow this link for details of the pensions roadshows co-hosted by CFS. CFS' Chief Executive, Mervyn Pedelty, is a Member of the Department of Work and Pensions' Employer Taskforce on Pensions.

Uninsured drivers In August 2003, the UK Government announced the Greenaway Review, which looks at the problem of uninsured driving. CIS welcomed the Review, and called for a wider range of penalties to be applied to uninsured and irresponsible drivers (such as community service orders and vehicle confiscation for repeat offenders). The motor insurance industry funds, via a policy levy, a compensation scheme for victims of uninsured drivers - the Motor Insurance Bureau.xi £260 million was contributed to the Bureau in 2003, which is ultimately paid for by insured drivers (typically, some £30 per policy per annum).

i www.mori.com/mfs
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ii www.experian.co.uk
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iii www.abcul.org
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iv www.co-operativebank.co.uk/business/publicsector_paypoint.html
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v www.co-operativebank.co.uk/services/guarantee_service.html
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vi www.co-operativebank.co.uk/personal/index.html and www.cis.co.uk
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vii www.co-operativebank.co.uk/personal/mortgages.html
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viii www.raisingstandards.net
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ix www.hm-treasury.gov.uk/Documents/Financial_Services/Savings/fin_sav_sand.cfm
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x www.dwp.gov.uk
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xi www.mib.org.uk/index.asp
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