Insurance DataLab picks out the choice complaints data to explore where insurers are succeeding and where they can target improvements

The insurance industry has emerged from a Covid-19-inspired surge in complaints, with the latest figures from the Financial Ombudsman Service (FOS) revealing a return to pre-pandemic complaints volumes.

This is according to Insurance DataLab’s latest analysis of ombudsman complaints figures, published exclusively by Insurance Times.

Over the second quarter of 2022 the FOS received more than 7,600 complaints across the main business lines in UK general insurance (UKGI) – down 15% on the same period the previous year when complaints referred to the ombudsman reached almost 9,000.

This does, however, represent a slowing of the rate of decline, with figures dropping by around a third year-on-year in each of the preceding three quarters.

This means that complaint referrals have now fallen for four consecutive quarters, following more than a year of increases that saw the level of complaints rise to a peak of 11,791 for Q1 2021.

Upheld rates have also been falling since the pandemic, with 26% of cases referred to the FOS over the second quarter of 2022 being found in favour of the customer.

This is some four percentage points lower than the same period in 2021 and is also the lowest upheld rate across the whole period of this analysis, which dates back to the second quarter of 2017.

Similar to case volumes, the upheld rate peaked in the wake of the Covid-19 pandemic, with the rate topping out at 34% in Q1 2021.

Keeping to the rules

This will be welcome news to insurers as they grapple with the new Fair Value and Consumer Duty regulations introduced by the FCA.

These new regulations not only ban the practice of dual pricing, but also introduce a number of new reporting and monitoring requirements for insurance companies to follow – a reduction in the number of complaints being referred to the FOS will certainly help to offset some of this increased workload.

New regulations do, however, also mean that insurers will need to keep themselves much more informed of their performance in the market when it comes to consumer outcomes and the perceived value of a policy.

Complaints handling is key here, with the FCA itself highlighting the importance of monitoring and analysing “complaints received about the product or service and the results of root-cause analysis of those complaints”.

Market breakdown

So, which products are the best and worst performing business lines in UKGI?

The most complained about product continues to be car and motorcycle insurance, with the ombudsman receiving some 2,740 complaints about the product over the course of Q2 2022 – equal to 36% of total complaints over that same period.

Indeed, since Q2 2017, car and motorcycle insurance has accounted for approximately one third of all complaints referred to the FOS – a total of almost 58,000 out of just over 176,250.

This proportion has risen to more than a third (35%) of cases for Q2 2022.

This should not come as a total surprise, however, given that motor insurance accounts for around 31% of total gross written premium (GWP) in the market, making it the largest single business line in UKGI.

The second most complained about product line over the second quarter of 2022 is buildings insurance, accounting for 20% of cases.

When it comes to upheld rates, however, motor insurance fared much better with an average upheld rate of 27% for Q2 2022.

Buildings insurance, meanwhile, fared slightly worse with an upheld rate of 29%.

Other business lines of note in this analysis include business protection insurance, which experienced a torrid time during the Covid-19 pandemic as evidenced by the furore surrounding the business interruption scandal that saw insurers pay out more than £1.3bn in redress, according to figures from the FCA.

Complaints referrals relating to business protection insurance peaked at more than 1,000 during the first quarter of 2021 before dropping to less than 175 for Q2 2022 – the most recent quarter covered by this analysis.

Over that same period, the upheld rate fell from 55% – the highest rate of Q1 2021 – to less than 7%, the lowest of all the business lines in this analysis.

Meanwhile, travel insurance – which also faced unprecedented pressures during the Covid-19 pandemic – saw complaint referrals peak at almost 2,600 in Q3 2020, a little under a quarter of all complaints and second only to car and motorcycle insurance.

This figure has since dropped significantly, with just over 500 travel complaints referred to the FOS during the second quarter of 2022, while the upheld rate has remained relatively steady – dropping from 32% in Q3 2020 to 30% in Q2 2022.

Over the second quarter of 2022, the product with the highest upheld rate is special event insurance, with some 42% of cases found in favour of the customer.

It is worth noting, however, that over this period there were less than 15 complaints about special event insurance that were referred to the FOS.

The second-highest upheld rate for Q3 2022 was building warranties with an upheld rate of 40%, while mobile phone insurance (35%) had the third-highest upheld rate of the quarter.

When it comes to the best performing business lines for upheld rates, business protection insurance topped the list with an upheld rate of 7%, followed by private medical or dental insurance (9%) and personal accident insurance (15%).

An eye on the competition

As well as understanding the overall market performance of the different business lines, the new FCA regulations mean that insurers must also be aware of how their competitors are faring.

Top of the list of providers with the best upheld rate over the second quarter of 2022 – for companies with more than 100 complaints – is LV=, with an upheld rate of 20% for Q2 2022. This was six percentage points better than the market average of 26%.

The insurer had just over 100 complaints referred to the FOS over that period, making it one of the least complained about of the large insurers.

Of the complaints categorised by the FOS, some 64% related to LV=’s claims process – a trend that broadly persists across the majority of providers in the market.

LV= was closely followed by Direct Line Group (DLG) in the upheld rate ranking – it reported an upheld rate of 21% over the same period.

However, the insurer received a little over 420 complaints, making it the third most complained about of all the insurers in this analysis.

It is also worth noting that DLG is also one of the largest insurers – it posted a GWP of £3.2bn for 2021, compared to £1.2bn for LV=.

Third on the list of providers with the best upheld rates is Advantage – the Gibraltar-based underwriting arm of Hastings. The insurer reported an upheld rate of 22% for Q2 2022, while it had just over 160 complaints referred to the ombudsman.

While these were the highest performing insurers for those with more than 100 complaints, it was those insurers with fewer complaints volumes that fared better when it came to average upheld rates.

Indeed, for insurers with fewer than 100 complaints, the average upheld rate for Q2 2022 stood at 25%, while that same figure for insurers with 100 complaints or more stood at 27%.

This shows that as size increases, the ability to get decisions right becomes harder for insurance companies – that is something that insurers must grapple with over the coming years.

Technology will play a huge role in helping insurers to overcome this hurdle as they grow their in-force policies, but it is important not to lose the human element.

Insurance DataLab’s latest Customer Experience Report, published in September 2022, named NFU Mutual as the best personal lines provider for customer experience.

The mutual insurer was praised for the human touch it offers its policyholders, with comments from a survey by Consumer Intelligence – a data partner for the report alongside Insurance Times, Fairer Finance and Trustpilot – praising the insurer’s call handlers for the way they handled calls.

This demonstrates that, while digitisation of the user journey in insurance is vital, – and, in many cases, beneficial to the consumer – technology cannot be too heavily relied on.

Instead, insurers should use technology as an enabler – automating processes that can help cut down on unnecessary processing times or data gathering, while rededicating human efforts to sensitive areas such as claims or complaints.

It is that fine balance between human and automation that is key to success in this area. With new Fair Value and Consumer Duty requirements putting even more emphasis on insurers doing the right thing, getting this balance right has never been more important.