TIO annual report 2007/08

How we operate - funding

The TIO is an industry-based alternative dispute resolution (ADR) scheme deriving its funding solely from members, who are charged fees for complaint resolution services provided by the TIO.

A member is charged fees only if the TIO receives a complaint from one of the member’s customers. The funding system therefore acts as an incentive for members to keep TIO investigations to a minimum by encouraging them to develop and maintain effective complaint handling and customer service procedures.

Complaints attract a direct fee that varies according to the level to which the complaint is escalated by the TIO. The fees charged in 2007/08 are shown below. In addition to these volume-related costs, a member pays a proportion of overhead or operating costs determined by its percentage share of total complaints. The indirect component in most years is roughly equal to the direct component, meaning that the full cost of a level 1 complaint, for example, would be about $68.

Table 2 TIO complaint fees

Enquiries ($34.10) and reviews ($550) are funded as part of operating costs.

Members are invoiced quarterly, based on an estimate of costs to be incurred in the following quarter. Each quarter actual and estimated charges are reconciled.

The funding model has two important consequences. If a member incurs no complaints it pays nothing to the TIO. During 2007/08, only 19 per cent (215) of the 1 106 members were charged for complaints.

Also, the model is based on the principle of demand-driven funding - if complaints rise, the TIO can fund the recruitment of extra staff to handle those complaints.

The TIO has a policy whereby the first four level 1 complaints and the first level 2 complaint each quarter are free to members. This resulted in members not being charged for 2 933 level 1 complaints and 475 level 2 complaints in 2007/08.

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