Insurers must be careful when handling motor claims and ‘do more to close the expectation gap’, says Insurance DataLab co-founder

The Financial Ombudsman Service (FOS) received 2,769 new case complaints around car and motorcycle insurance in Q3 2022, according to the body’s latest complaints data, published on 15 February 2023.

Overall enquiries to the FOS regarding car and motorcycle insurance amounted to 3,686. Of the 543 cases that were referred for an ombudsman’s decision, 29% were upheld in favour of the customer.

As a result, this line of business remains one of the top five most complained about products in FOS’ data.

Speaking exclusively to Insurance Times, Insurance DataLab co-founder Matt Scott said the rise in complaints is a “worrying trend for insurers, particularly given the FCA’s focus on this area in the wake of the Consumer Duty”.

Of the complaints received regarding car and motorcycle insurance, respondents said that insurers were giving them less money than their car’s worth following a theft or accident where the vehicle was written off.

Where FOS upheld these complaints, it often found that the insurer’s offer was unfair - Insurance DataLab’s own analyis of FOS data shows that the majority of complaints over recent years pertain to claims.

For example, across all insurance product lines, it found that claims accounted for 79% of complaints referred to the FOS between April 2017 and September 2022. 

Specifically looking at motor insurance during this same reporting period, claims accounted for 63% of complaints referred to the FOS. Complaints also arose around admin (34%) and sales or advice (3%). 

Within its Q3 2022 data, the FOS reported examples of insurers not considering all the available information – this led to offers that were less favourable when a vehicle was written off.

It also noted that enquiries regarding insurers rejecting claims for a vehicle theft by deception have increased.

Fair value

Scott noted that during the UK’s current cost of living crisis, insurers “need to be more aware of the inflationary pressure on the cost of vehicles” and take this into full consideration when arranging settlements – especially given that “some 41% of motor complaints were upheld in favour of the customer over this most recent period and that is simply too high”.

He continued: “Insurers also need to do more to close the expectation gap that seems to be a perennial problem for the insurance industry, where insurers and brokers are not adequately explaining what is and isn’t covered by a policy.

“Until this issue is solved, then we will continue to see too many complaints being referred to the ombudsman and subsequently upheld in favour of the customer – in the Consumer Duty age, this is simply not good enough.” 

Scott further highlighted that closing the expectation gap will also address the false belief from external industries that insurers are denying claims that should be settled, which makes “good sense” from both a customer experience and business lens.

He added: “When [the FCA’s] fair value [regulation] banned dual pricing, shop around rates for motor insurance plummeted, meaning that winning new business is harder to come by.

“Retaining existing customers is therefore vitally important to insurers in this space and more needs to be done to close the expectation gap that could very easily lead to insurers haemorrhaging customers at renewal if they do not set things right.”