Ombudsman procedures – a level playing field between businesses and customers? The out-of-court enforcement of legitimate claims as a means of promoting compliance with contracts
It is a constant source of frustration for consumers when companies fail to provide services agreed upon in a contract. They are then faced with the question of whether to take legal action to assert ‘their rights’ – which entails costs (technical term: transaction costs). This ethos module examines the scenario where an insurer fails to provide a benefit that the policyholder expected from them.
However, (insurance) customers are not always actually in the right when they feel they have been treated unfairly by (insurance) companies. Many consumers lack the necessary specialist knowledge; after all, they are laypeople. The situation is quite different for companies, which are professionals in their field. They have a more or less significant information advantage (a form of information asymmetry). However, they could also exploit this to the detriment of the customer. But how is a consumer, as a layperson, supposed to assess this? What options do they have to have a disputed matter examined independently and by experts without immediately resorting to the courts?
Ombudsmen, as well as conciliation and arbitration bodies, exist to resolve such disputes between businesses and consumers out of court. This ethos module uses the insurance industry’s ombudsman procedure as an example. It answers the following questions:
- Can consumers rely on the ombudsmen to reach an impartial decision?
- How does the process work? How long does it take? Who bears the costs?
- Is it possible, or indeed necessary, to take the matter to court in the end?
- Do ombudsmen ensure a level playing field between companies and customers?
- Are further developments to the ombudsman system desirable, for example from a consumer perspective?
- Did insurers act altruistically in establishing an ombudsman?
- Does the mediation process, if anything, offer benefits for the economy as a whole?
The pupils explore the key aspects of the ombudsman procedure through guided online research. In doing so, they acquire the knowledge to act as responsible consumers and, if necessary, contact an ombudsman themselves. The conclusion and highlight of the teaching module is a moderated conference in which the pupils assess the dispute-resolution potential of the out-of-court ombudsman procedure and, where appropriate, develop it further. They practise acting as responsible citizens.
Curriculum relevance: Breaches of contract are a standard element of both general economic education and commercial vocational training. The same applies to the relationship between the market and the state within the economic system. This ethos module ties in directly with this and adds a business ethics perspective to the usual assessment under contract law.
Module: Ombudsman Procedure
Title:
Ombudsman proceedings – A level playing field between businesses and customers? The out-of-court enforcement of legitimate claims as a means of promoting contractual compliance
Author:
Mark Oliver Meßmer
Editors:
Thomas Retzmann / Tilman Grammes