FCA issues stern warning as it clamps down on home and motor insurers

The FCA has told home and motor insurers that they must improve their treatment of vulnerable customers and claims handling after finding multiple examples of ”poor practice” among general insurance (GI) firms.

In its Cost of living: good and poor practice in the general insurance market review, which was published yesterday (3 July 2023), the regulator said it had found examples of lengthy complaints handling times and people not given appropriate settlements.

For example, it highlighted instances of motor insurance consumers being offered a lower price than their vehicle’s fair market value after their car had been written off following an accident, which is not allowed under FCA rules.

The review also found that some firms were unable to show they were monitoring customer outcomes well enough, with several GI firms indicating poor flows of information between intermediaries and manufacturers.

And some businesses indicated challenges with providing information about financial support to customers, while there were instances of them being unable to demonstrate how they identified vulnerable customers.

As a result, the FCA said for both home and motor insurance, some firms provided very low numbers recorded on their systems.

The regulator said it was taking action against firms who had broken its rules and urged consumers to contact their insurance company to complain if their claims have been delayed or they were not happy with how their claims were being handled.

Sheldon Mills, executive director of consumers and competition at the FCA, said: ”Timely and fair claims handling is especially vital during the cost of living squeeze. 

”While we have seen many firms treating their customers correctly, we found too many examples of customers not receiving the service they’re entitled to. 

”Where we found issues, we’ve told firms to put them right. We’ll be monitoring them to ensure they do.”

Consumer Duty 

This came ahead of the FCA implementing its Consumer Duty regulation on 31 July 2023.

It sets out a slew of updated regulations and requires firms to review their products and services against a new standard of fairness.

The FCA’s questionnaire – which was conducted between August and November 2022  and involved 11 firms – assessed whether they were meeting the three key expectations outlined in the FCA’s Dear CEO letter, published in September 2022.

Those were providing appropriate support to customers in financial difficulty, ensuring consumers get access to fair value products and ensuring claims were handled promptly and fairly.

Examples of good practice were found in the FCA’s review, such as payments holidays being offered, waiving fees or excesses and setting up customer support hubs.

However, it stated that work needed to be done by some firms that were “not yet able to demonstrate they have effective governance and controls”.

In its report, the FCA said: ”We have included examples of good practice and poor practice.

”These aim to help all firms meet our expectations, so customers benefit from better outcomes.

”Firms should also consider these examples in the context of their preparations for the new Consumer Duty.”