FCA clamp down demanded over ‘widespread’ failures in claims process

Which? has called on the FCA to crack down on insurers as it claimed that consumers are being “ripped off” by claims handlers.

The consumer champion said there were “widespread” failures during the claims process and that the regulator needed to take action against those that fall short of required standards.

According to Which?’s data, which was published today (23 July 2024), almost half (48%) of all people making a claim about home, travel, motor and pet insurance experienced at least one problem in their journey.

These problems included having to repeatedly chase insurers for information on their case and firms not identifying and responding appropriately when people were struggling as a result of the incident that led to their claim.

Which? also said that some customers felt harassed for difficult to obtain information about seriously ill or deceased family members before being told the records were not necessary after all.

And the research found that insurers’ behaviour had a direct impact on customers’ physical and mental health.

Nearly a third (31%) said insurers’ actions negatively impacted their stress levels, while one in 10 had sleep issues and another one in 10 said the claims process affected their physical health.

Which? commissioned research agency Basis to conduct 24 in-depth interviews for the research, while 3,322 recent insurance claimants were surveyed online.

Rocio Concha, Which? director of policy and advocacy, said: “This research paints a shocking picture of insurers’ failure to handle customers’ claims in a timely, empathetic way.

“It’s particularly concerning to see how people in vulnerable circumstances due to the event that led to their claim are being failed by their insurers.”

Consumer Duty

Insurers have been bound by the FCA’s Consumer Duty since July 2023, which sets out requirements for firms to follow to deliver good outcomes for their customers.

Which? believes these reviews will mark a test of the regulation, saying that “firms are failing to consistently meet its requirements for customers in vulnerable circumstance”.

“The regulator must take tough action against insurers that consistently fail to meet the required standards,” it added.

Which? has also launched a campaign to “end the insurance rip-off” and clamp down on insurers charging customers who can only afford to pay for cover monthly and face high interest rates on payments.

“At a time when many consumers face soaring premiums, it’s clear they’re being ripped off – either by abysmal claims handling that doesn’t match up to the price they’re paying, or by unjustifiably high premiums, especially for those who can’t afford to pay for a year’s cover in one go,” Concha said.

“Today, we say enough is enough. The rules for insurers are clear, but the insurance rip-off will not end unless the regulator takes meaningful action against firms that consistently fall short.”