How are the top insurers faring on complaints handling?

With the deadline for Consumer Duty looming large on the horizon, companies across the UK general insurance (UKGI) landscape have been working hard to measure, analyse and benchmark their performance across a number of different metrics.

One of the most important measures for these new regulations – as highlighted by the FCA itself – is complaints handling.

That is why Insurance DataLab has analysed the performance of the five largest insurers in UKGI, with the results published exclusively by Insurance Times.

When it comes to the volume of complaints, each of the insurers that make up this analysis are reporting fewer claims than they were five years ago.

The most complained about of these five insurers is Direct Line Group (DLG), with the insurer having a total of just over 12,000* general insurance complaints referred to the Financial Ombudsman Service (FOS) over the last five years.

This compares to around 10,200 complaints for Axa over that same period, with Aviva receiving almost 9,900 complaints, RSA 7,500 and Allianz 6,600.

It is worth noting, however, that as DLG is predominantly a personal lines insurer, and thus has a larger proportion of its books of business falling more directly under the scope of the ombudsman.

On the rise

But while each of the insurers in this analysis are, indeed, reporting lower complaints volumes compared to five years ago, the latest trends seen in these figures suggest that complaints may be picking up again after a decrease following a Covid-19 inspired spike in 2020 and 2021.

Over the first quarter of 2023, all five insurers reported a growing number of complaints being referred to the FOS compared to the same period in 2022, making it the second consecutive quarter where each insurer has reported a year-on-year increase in complaints volumes.

Indeed, you have to go back an entire year to the first quarter of 2022 to find a period when all five insurers reported an improving picture under this measure.

It is DLG once again that heads the pack when it comes to growth in complaints figures, with the insurer reporting a 54% increase in complaints across Q1 2023 to more than 700 – up from less than 500 a year earlier.

A lot of this increase was driven by a spike in travel insurance-related complaints that more than doubled to over 100 – up 153% on the first quarter of 2022 – making it DLG’s third most complained about business line.

But it was motor insurance that the insurer received the greatest number of complaints about, drawing more than 300 complaints over the first three months of the year – up 73% on the same period in 2022.

Meanwhile Allianz, which has reported the lowest number of complaints over the last five years, saw a 40% uptick in complaints being referred to the FOS. This is, however, still the lowest volume of each of the five insurers in this analysis.

RSA also experienced a significant increase in complaints, with referrals to the FOS jumping by 30% to almost 500, while Aviva saw a 14% increase in complaints to nearly 600.

And Axa was the only insurer of these five to report a single digit increase, with complaints rising by 9% to just under 600 – making it the third most complained about insurer over the first three months of the year.

Claims process

The interesting part of a complaints analysis, however, is having the ability to drill down into the data and find out which areas of the business are receiving the most complaints.

Unsurprisingly, it is the claims process that draws the highest number of complaints, with claims complaints accounting for more than 80% of complaints about each of the insurers in this analysis over the last five years.

Allianz had the largest proportion of claims-related complaints, with claims accounting for 93% of overall complaints volumes – this compares to 89% for Axa, 85% for RSA, 82% for Aviva and 80% for DLG.

It is worth noting, however, that for most of the insurers in this analysis, less than 5% of claims result in an internal complaint, according to the latest FCA value measures published in November 2022.

The exceptions to this include several Aviva business lines, including home insurance and before the event legal expenses insurance, for which between 10% and 15% of claims receive a complaint, and gadget insurance, home emergency cover, car and motorcycle insurance and annual worldwide travel insurance – all of which had between 5% and 10% of claims receiving a complaint.

Axa also saw a number of business lines where more than 5% of claims received a complaint, including home insurance, which was as high as 20-25% for buildings only cover, motorcycle insurance (10-15%), travel insurance (5-15%) and motor insurance (5-10%).

RSA had between 5% and 10% of its home insurance claims resulting in a complaint, while DLG saw higher figures for before the event legal expenses (5-15%), home insurance (5-15%) and motor (5-10%).

Meanwhile, the only business line within the Allianz Group to have more than 5% of claims resulting in a complaint was the buildings only cover provided by Highway Insurance, with between 5% and 10% of claims on this business line resulting in a complaint.

Worryingly, admin-related complaints still accounted for a substantial number of complaints for some insurers, with DLG (18%) and Aviva (16%) having the highest proportion of admin-related complaints over the last five years.

Meanwhile, Allianz (7%) was the only insurer of these five to have less than 10% of complaints relating to policy administration over that same period.

The truest test

The truest test of an insurer’s complaints handling, however, should arguably be assessed by the upheld rate – the proportion of claims for which the FOS has told the insurer they got their decision wrong and instead finds in favour of the customer.

And despite being the most complained about of the five largest insurers, DLG is the best performer when it comes to upheld rate, having the lowest proportion of cases found in favour of the customer with an average of 23% over the last five years.

This is some five percentage points better than Aviva, which was the next best insurer with an upheld rate of 28% – DLG has consistently performed better than the industry average.

Indeed, DLG’s motor insurance book – which accounted for more than 50% of the insurer’s gross written premium (GWP) in 2022 – has reported a better-than-average upheld rate in all but one of the quarters since Q2 2017, when Insurance DataLab first started analysing FOS complaints figures.

The only exception to this outperformance was in Q4 2019 when the insurer’s motor upheld rate rose above the industry average by less than 0.3 percentage points.

The remaining three insurers that make up this analysis all had upheld rates of 30% or higher, with Allianz having the third best upheld rate (30%), followed by RSA (31%) and Axa (34%).

The average upheld rate has remained relatively steady over the last couple of years, although Axa has seen a steadily increasingly upheld rate in recent quarters – although this did fall back to 37% for Q1 2023 after rising to 42% in the final quarter of 2022.

Axa’s upheld rate has consistently risen above the industry average and indeed the insurer has been the worst performing of the five insurers in this analysis in 13 out of the last 20 quarters.

Indeed, the insurer’s main line of business, motor insurance with GWP of more than £1bn in 2022, reported an upheld rate of 44% in the first quarter of 2023 – an increase of 12 percentage points on the same period a year earlier.

This means that the insurer’s motor business has reported a higher-than-average upheld rate in every quarter since Q2 2017.

RSA, meanwhile, saw its upheld rate jump by 13 percentage points to hit 42% for the first three months of 2023, up from 29% a year earlier.

This jump was driven by increase in the upheld rate across six of the seven lines of business for which the insurer has FOS complaints figures.

The biggest jump was experienced in legal expenses insurance, which saw its upheld rate increase by 42 percentage points to 50%.

This means that legal expenses insurance was RSA’s worst performing line of business when it comes to the proportion of complaints found in favour of the customer, but it is worth noting that legal expenses only accounted for less than 4% of RSA’s total complaints over Q1 2023.

More to be done

Across the market as a whole, the average upheld rate currently stands at a little under 36% for the first three months of 2023 and this should be a worrying statistic for the insurance industry.

With the deadline for Consumer Duty implementation fast-approaching, the FCA will undoubtedly be looking at this figure and wondering if more than a third of complaints being upheld by the ombudsman really means that insurance is delivering value for its consumers.

At the very least, it demonstrates a lack of expectation setting by the insurance industry – and this needs to change.

Insurers need to do a better job at explaining what is and isn’t covered by a policy, as well as making charges for things like mid-term adjustments and premium financing more transparent and set at a fairer rate.

It is only with these changes that the industry will be able to bring down that upheld rate, reduce overall claims volumes and deliver better outcomes for their customers.

And for those that don’t, FCA intervention may very well be waiting in the wings.

• Insurance DataLab has rounded complaints volumes to the nearest 100.