Why Which? is launching a super-complaint over insurance market failings
Insurance companies are letting consumers down badly. Today Which? is calling for a fundamental reset of the market, says Rocio Concha
Which? is today using its statutory powers to submit a super-complaint to the Financial Conduct Authority, calling for a fundamental reset in how home and travel insurance companies treat their millions of customers.
Insurance is not a luxury product, but an essential purchase for tens of millions of people. It is critical to the functioning of our economy, supporting household financial resilience, which ultimately facilitates economic growth.
Insurance is one of the few products we buy, hoping never to use. But when a claim goes wrong, the consequences can wreak havoc on people’s lives in the aftermath of already traumatic events.
That is why high standards in the insurance sector should be non-negotiable. But poor levels of service and customer outcomes have been tolerated for too long, by the industry itself and the FCA as its regulator.
Poor levels of service and customer outcomes have been tolerated for too long, by the industry itself and the FCA as its regulator
Consumer trust in insurance has been at dire levels for years – only social media platforms currently perform worse, according to Which? data, while claims acceptance rates for home and travel insurance have been consistently low.
Our analysis of the FCA’s own data found fewer than two-thirds of buildings-only claims are being accepted, with one major firm accepting just a third of claims. We also found that over half (54 per cent) of all people making a home or travel insurance claim experienced at least one problem. Worryingly, half of consumers (51 per cent) who were severely impacted by the incident that led to their claim said their home or travel insurer’s actions negatively impacted on their mental health.
Insurers gaslight customers
It is impossible not to be moved by the human stories we have heard in the course of our research. A couple forced from their home by a fire two weeks before the birth of their second child. Still living in rented accommodation 18 months later, they say they feel “gaslighted” by their insurer and are taking their dispute to the Financial Ombudsman. Or the impressive Claire Massey, who has tried to turn her own traumatic house fire experience into something positive, setting up a support network to help guide others through the claims process.
Consumers should not have to go to such lengths. There are rules and laws that should prevent poor behaviour from insurers and the FCA has a duty to enforce them. Indeed, the regulator has formally reviewed home and travel insurance claims handling twice in recent history – in 2014 and earlier this year. However, despite uncovering significant failings, the FCA has taken little meaningful action.
Which? believes this amounts to a pattern of failure by the regulator to meet its statutory objective to secure “an appropriate degree of protection for consumers”. After careful consideration, Which? is launching a super-complaint now – including extensive new evidence – because consumers can not afford to wait any longer for action on home and travel insurance.
There may not be a quick fix for such broken markets, but the FCA can seize this opportunity by urgently taking action against firms that are currently breaching the rules and committing to a thorough investigation of the problems Which? has identified. The government and the FCA should then work together to review the UK’s consumer insurance protection frameworks to identify key areas where these need strengthening.
None of this should pose a threat to insurers that follow the rules and do the right thing by their customers. It should give them reassurance that they won’t be undercut by irresponsible rivals and greater confidence to invest and contribute to economic growth, while driving up standards across the industry.
This moment must be a turning point that leads to fundamental change in how insurance companies design and sell policies, communicate with customers and handle claims. If that can be achieved, the insurance industry in these markets could once again be viewed by consumers as part of the solution when things go wrong, instead of another problem standing in the way of getting their lives back on track.
Rocio Concha is director of policy and advocacy at Which?