FCA taking action against firms after finding evidence of ‘poor’ handling of insurance claims

The FCA has said it is taking “action against specific firms where necessary” after seeing “concerning evidence of poor claims handling practices” in some cases.

The regulator said that while rising motor insurance premiums are largely driven by external cost pressures, shortcomings persist in how some insurers handle claims.

FCA analysis showed that increases in the cost of motor claims – due to higher prices for cars, parts, labour, energy and more complex cars and supply chains – have contributed to premium increases.

“This confirms that increased costs outside of firms’ control, rather than firm profit, were the biggest cause of recent premium rises in motor insurance,” the regulator said.

However, the FCA did identify that referral fees from credit hire firms and claims management companies were associated with slower claims processing and increasing costs.

The FCA also said that while it saw some good practice in the home and travel sector, it uncovered “concerning evidence of poor claims handling practices”.

Where it has seen poor practice from firms, the regulator is addressing it directly with them, including taking action against specific firms where necessary.

Evidence found

Examples highlighted by the FCA of poor claims handling include lack of oversight of outsourced services, resulting in poor customer outcomes, delays in settling claims and high complaint volumes.

It also found evidence of insufficient management information, resulting in failures to promptly identify and resolve claims handling issues and delays.

Meanwhile, cash settlements being used without sufficient consideration of whether they are most suitable and high rejection rates for storm damage claims were also highlighted.

Sarah Pritchard, deputy chief executive at the FCA, said: “Insurance provides peace of mind but people must be confident they can get a fair deal and be treated right when the worst happens.

“External cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling, particularly in home and travel.

“That’s why we’re stepping up – making sure claims are handled promptly and fairly and pushing for a coordinated effort to tackle the root causes of rising motor premiums.”

The FCA said it is providing the evidence needed for co-ordinated action from government, industry and other regulators, as part of the government’s motor taskforce, to help drive down the cost of motor premiums.

“A well-functioning insurance market helps consumers navigate their financial lives and supports growth by building people’s resilience to financial and personal shocks,” Pritchard said.