The latest results should make a ‘worrying read for insurers’ as the Consumer Duty deadline looms, says co-founder

Increasingly high levels of upheld rates shown in the newest figures from the Financial Ombudsman Service (FOS) reveals a “bleak picture for complaints handling in the insurance industry”.

That was according to Insurance DataLab, which said it found more than one in three complaints were upheld in favour of the customer in the first three months of 2023 in a statement released yesterday (13 July 2023).

The FOS states an upheld complaint is when an individuals’ complaint is found to be valid upon the ombudsman discovering “something went wrong” during investigation.

Insurance DataLab found special event insurance was the worst performer, with some 57% of complaints upheld by the FOS in the first quarter of 2023 – up from around 39% during the same period in 2022.

Building warranties had the second highest upheld rate, with the FOS finding 44% of complaints in favour of the customer – equating to a 17 percentage point increase compared to Q1 2022.

Insurance DataLab noted that both business lines had low levels of complaints, however, with the FOS receiving 35 and 78 complaints about special event insurance and building warranties respectively.

Biggest complaints

Meanwhile, travel insurance received a total of 1,426 complaints referred to the ombudsman in Q1 2023 – up 186% from 2022.

The product also had the third highest upheld rate at 43% – this was an increase of 10 percentage points from 33% for Q1 2022.

Insurance DataLab also found that motorcycle insurance received 4,221 complaints in Q1 2023, up 51% year-on-year, of which 33% were held in the customers favour. Whereas in Q1 2022, a total of 27% were upheld.

And buildings insurance received 1,805 complaints, equating to an increase of 25%.

Those complaints that were upheld in Q1 2023 sat at 39%, up from 31% in the same period a year previous.

’Worrying reading’

Dan King, co-founder at Insurance DataLab, highlighted the results should make a “worrying reading for insurers, especially with the Consumer Duty implementation deadline looming large on the horizon”.

The new regulation, which comes into force from 31 July 2023, creates new requirements for firms within the sector to ensure – and crucially, evidence – positive customer outcomes around four metrics, which are products and services, fair value, consumer understanding and consumer support.

“More than one in three complaints being upheld in favour of the customer and a significant increase in the number of complaints being referred to the FOS does not exactly scream fair value,” King said.

“With the FCA stating that it will be looking for outliers in such data when it comes to monitoring performance post-implementation, those firms with particularly high upheld rates could well find themselves under scrutiny.”