Which? demands FCA action as insurers ‘fail to meet’ Consumer Duty standards

Which? has claimed that many insurers are ”failing to meet their obligations” under the FCA’s Consumer Duty regulation.

The consumer group said the market was seeing “shockingly” high claims rejection rates and an “avalanche” of complaints about appalling customer service and claims handling.

It also claimed that limited customer understanding of policy limitations, a lack of clear information about exclusions and confusing or difficult to answer questions can contribute to claims later being rejected.

Which? made such statements after researching the struggles people face when choosing insurance policies.

It showed that the majority of consumers (65%) believe that insurance regulations mean products must meet a minimum level of cover and more than half (54%) believe the FCA will ensure that all insurance products provide adequate protection.

“These expectations are not matched by the reality,” Which? said.

For example, the group said that claims rejection rates sat at 37% for buildings only insurance, 28% for combined buildings and contents cover and 21% for annual worldwide travel policies

And when the consumer champion followed a group of 24 people as they chose insurance products, it found their experiences highlighted issues with the questionnaires used to generate personalised quotes.

When questions were difficult to answer, consumers sometimes went with a “best guess”, without necessarily realising that any incorrect answers could invalidate a claim at a later date.

Demand

Which? is now calling for the FCA’s ongoing review of insurers’ claims-handling arrangements to lead to action.

“This review should lead to action against firms that have not sufficiently addressed persistent issues that are driving high claims rejection rates,” it said.

Rocio Concha, Which? director of policy and advocacy, added: “Too many people are having their claims rejected and enduring appalling treatment at the hands of insurance companies. The impact on their finances and on their mental and physical health can be devastating.

“Our latest research shows how many of the problems people face with insurance can be traced back to a flawed sales process, where firms are failing to support customer understanding of complex terms and exclusions which can sow the seeds for disaster.

“The FCA has the power and responsibility to step in and protect consumers. The regulator must show its teeth and start taking tough enforcement action against insurers that are failing to meet their Consumer Duty obligations, or to comply with FCA insurance rules or wider consumer law.”