UK's financial ombudsman settled record number of disputes last year

* 519,000 disputes settled, more than double 2012 figure

* PPI complaints account for 78 percent of cases

LONDON, May 20 (Reuters) - Britain's Financial OmbudsmanService settled a record 519,000 disputes last year, more thandouble the number in 2012, with the increase driven by casesrelating to the mis-selling of loan insurance.

The independent body, which was set up to deal with disputeswhere financial services companies and their customers cannotreach agreement, said on Tuesday that payment protectioninsurance (PPI) accounted for 78 percent of all cases, with thenumber of PPI complaints rising 6 percent to nearly 400,000.

"It has been an unprecedented 12 months for the ombudsman byanyone's standards," Chief Ombudsman Tony Boorman said.

Banks have set aside more than 20 billion pounds ($33.7billion) to compensate customers wrongly sold PPI policies,which were meant to protect borrowers against sickness orredundancy but were often sold to customers who didn't want orneed them, or who would have been unable to claim on theirpolicies.

Britain's biggest four banks - Lloyds Banking Group, Barclays and Royal Bank of Scotland -accounted for 63 percent of total complaints received, up from62 percent last year.

The ombudsman found in favour of the consumer in 58 percentof cases.

General inquiries received by the ombudsman climbed to 2.3million, equivalent to 40,000 a week.($1 = 0.5943 British Pounds)

(Reporting by Matt Scuffham; Editing by David Goodman)