The Financial Ombudsman Service (FOS) will restructure some operations to reduce backlogs as it responds to an independent review that found delays in dispute resolution have eroded industry support for the organisation.

“There is a level of frustration that is colouring stakeholder relationships with FOS,” the 150-page report from CameronRalph/Navigator says.

It says FOS meets benchmarks for industry-based external dispute resolution schemes in terms of accessibility, independence, fairness, accountability and effectiveness. But it only partially meets the standard of efficiency due to problems with timeliness.

FOS agrees with most of the 33 recommendations or says it will investigate suggestions to streamline its processes.

It will introduce a process to fast-track decisions for simpler, low-value disputes for claims below $10,000.

The registration and acceptance process will be redesigned so financial services providers have a final opportunity to resolve disputes before FOS steps in.

The service will consult on the process and aim to implement all changes before July next year.

The Insurance Council of Australia has welcomed the review. It says the actions by FOS to reduce backlogs and review processes will improve consumer outcomes and streamline processes for insurers.

The first independent review since FOS was formed in 2008 by the amalgamation of several industry schemes has found the brand is well recognised and consumer awareness is much higher than in the days of multiple schemes.

But it says the FOS organisational model is at or near the end of its effectiveness.

The service’s achievements are “diminished in stakeholders’ eyes by significant timeliness problems and a view that its ‘value add’ takes far too long to emerge in the dispute-handling process”.

The report says FOS sometimes has a difficult relationship with financial services providers, which would respond better to a more “plain-speaking style” and effort to understand the challenges they face.

Small businesses want access to FOS for their general insurance disputes. A modest increase in jurisdiction – such as to include loss of profits/business interruption insurance – would allow the service to deal with some of the 14% of disputes that are currently excluded.

The report also calls for expansion of jurisdiction over motor disputes involving uninsured third parties, so FOS can consider disputes where the insured makes a claim but fails to pay the excess.

An award in favour of the uninsured third party should subtract the amount of the excess, and the cap on such disputes should be raised from $3000 to $5000, it says.

FOS says it will bring specialist expertise into disputes earlier to speed up resolution.

It will also revisit its process for closing unmeritorious disputes.

The review suggests FOS should work with financial services providers to develop programs that enable FOS staff to build their industry expertise, and that it look at secondments from the insurance and investments industry to fill industry and experience gaps.