Cases are currently paid by financial businesses when complaints are referred and all retail finance businesses pay a levy.
The increase of free cases means that only 1% of businesses will have to pay any case fees at all.
As well as the proposal to boost the number of free cases, the FOS also looked to develop a new charging model which would encourage greater efficiency in complaint handling.
The FOS said the one-size-fits all approach was becoming outdated.
The proposals are expected to be implemented in April 2013 and will follow a year when the FOS expects a record year of complaints in 2012.
The ombudsman expects 1.4m consumer enquiries and expects 285,000 new cases in 2012/13. Some 165,000 of those are expected to be PPI cases.
For 2012 the FOS will continue to charge cases after the third free allowance. One in four businesses with complaints referred to the ombudsman service are expected to pay case fees.
It will also continue to charge a supplementary case fee of £350 for each PPI mis-selling case referred to it in 2012 but only when businesses have more than 25 PPI mis-selling cases a year.
Tony Boorman, principal ombudsman at the FOS, said: “A year after the High Court ruling gave us legal finality on the approach that financial businesses should take on PPI complaints, it's disappointing that there's little finality for significant numbers of consumers who are still waiting for their bank or insurer to deal with their complaint.
“The delays and inconvenience that this causes consumers means the ombudsman now has to gear up for unprecedented demand and volatility in our workload.
“Our proposals to make sure we have the operational capacity to handle record volumes of cases involve those businesses who account for these complaints contributing the most to sorting out the problems.
“But in these difficult economic times – when consumers and businesses alike are tightening their belts and facing uncertainties – this is not welcome news for anyone.”
