This follows an outside recommendation compelling Canadian investment companies to abide by the OBSI’s compensation decisions, according to a report by the Insurance and Investment Journal
In June, former New Zealand Banking Ombudsman Deborah Battell presented an independent evaluation of the OBSI in which she said its current mandate “prevents it from fulfilling the fundamental role of an ombudsman, (that of) securing redress for all consumers who have been wronged.”
Battell noted that unlike comparable international financial sector ombudsmen, the OBSI doesn’t have binding authority. In short, the office can’t compel firms to pay compensation. Indeed, 18% of the consumers who came to OBSI in 2015 received less than the office recommended.
“I find this a significant number – that’s one-fifth of our cases,” Sarah Bradley, OBSI ombudsman and CEO, told the Journal
. The office’s 2015 annual report stated that consumers received an average compensation of $26,258 on the investment side.
There is another school of thought that says giving OBSI binding authority isn’t necessarily a good idea. Holly Nicholson, executive director, ombudsman and general counsel for the OmbudService for Life & Health Insurance (OHLI) told the Journal
the nonbinding technique has worked for life insurance companies in her jurisdiction.
Currently, consumers who aren’t happy with OBSI’s recommended settlement can go through the court system to try to get more. But Nicholson says that even a courtroom decision doesn’t mean a settlement can be enforced or collected quickly.
“A binding decision at a court is subject to appeal, and then if you are ultimately successful in the final appeal you’ve got to collect that money – and that can be a very arduous and long step,” Nicholson told the Journal
. “The whole concept of an ombudservice or an alternative dispute resolution provider is to make it fair, fast and effective. The court process or any binding process, in order to have due process and fairness, will have to build in an appeal mechanism which, in and of itself, is going to delay things a lot.”
Sun Life at centre of cover storm
Is the Ombudsman going to bat for insurance clients?
The effectiveness of the Ombudsman for Banking Services and Investments (OBSI) to mandate change in the investment industry has again come under the microscope.