Regulatory action warning issued as motor complaints surge

Complaints to the FCA about motor insurance products have surged, new figures have revealed.

According to an analysis of FCA complaints data by Insurance DataLab, more than 280,000 customers were unhappy about motor insurance over the second half of 2023, up from a little under 240,000 during the same period in 2022.

This means that there have been more than 2.5m complaints made about the product over the last five years – Insurance DataLab claimed this made it the most complained about business line in UK general insurance.

And over that same period, insurers have paid out almost £580m in redress for motor complaints.

Insurance DataLab co-founder Matt Scott said such figures could risk regulatory action from the FCA.

For example, the regulator’s Consumer Duty rules require firms to measure, analyse and benchmark their performance across a number of metrics to bolster service.

These metrics include products and services, fair value, consumer understanding and consumer support.

“Consumer Duty means that the FCA has never been more interested in customer outcomes and this type of data,” Scott said.

“Insurers need to sit up and take notice, otherwise the industry could soon be facing a serious reputational crisis.”

Uphold rate

While complaints were high in the motor sector, Insurance DataLab also revealed that across all business lines, the industry’s uphold rate had fallen in recent months following a spike in the rate in the wake of the Covid-19 pandemic.

Insurers upheld around 58% of cases over the second half of 2023, down from a high of 67% over the first half of 2022.

Scott said: “While the recent drop in upheld rates might seem positive at first glance, it raises concerns about the underlying issues insurers face.

“It is important to remember that these figures relate to internal complaints handled by the insurer and when complaints are not upheld there are many that will be referred on to the Financial Ombudsman Service (FOS) by the policyholder.

“And those referrals have been on the increase in recent years – as has the proportion of complaints being upheld by the ombudsman.

“So, while a falling upheld rate in the FCA figures may appear to be a positive for the industry, it may just be masking a problem if these decisions are later overturned by the ombudsman.”