Warning as data shows insurers ‘need to up game’ ahead of Consumer Duty deadline

Insurers have been told they need to “up their game” as new data revealed many policyholders whose claims were not being paid in full were being left in the dark about the decision.

In a statement yesterday (26 July 2023), Which? said it was concerned that vagueness from insurers was making the process following a claims decision “needlessly difficult”.

An ABI spokesperson told the consumer champion that the association’s members were “always looking at ways to improve communication with customers and know that sharing information in a clear, accessible and timely way is vital”.

However, Which? said some 77% of people with car insurance, 56% with home insurance and 43% with travel insurance were not provided with a reason for their claim not being paid in full.

This was despite less than half of car, home and travel insurance claimants reporting that their claim was either partially accepted, rejected or in dispute.

The findings came from a survey in November 2022 of over 2,200 car insurance customers and over 1,500 home insurance customers who had made a claim within the last two years.

In March 2023, Which? also surveyed 804 travel insurance claimants who had made a claim within the last two years.

Sam Richardson, deputy editor of Which? Money, said: “No one wants to be in the position where they have to claim on their insurance – still less have that claim be turned down.

“But not getting an explanation for why a claim hasn’t been accepted in full isn’t just frustrating – it puts you, the consumer, at a serious disadvantage.

“Claimants who don’t get the full picture from their insurers will struggle to take their claim to the Ombudsman, as they don’t have much information to prove where they and their insurer disagree.”

Consumer Duty

This came just ahead of the FCA’s new Consumer Duty regulation coming into force on 31 July 2023.

As part of this, the regulator requires firms to ensure and evidence positive customer outcomes around four metrics – products and services, fair value, consumer understanding and consumer support.

Which? said it was concerned that firms were “falling short” of this requirement and urged the FCA to monitor performance and hand out “tough penalties” for those who fall below the required standards.

“Insurers need to up their game and let claimants know precisely why their claims are not being accepted in full,” Richardson said.

“As part of its new Consumer Duty, the FCA should clamp down on firms that fall below the required standards.”

In response to the findings, an ABI spokesperson told Which?: “Insurance is there to protect you when things go wrong and our data shows that the vast majority of claims are accepted.

“However, we can appreciate that it is frustrating when a claim is declined and knowing why is crucial.

“Our members are always looking at ways to improve communication with customers and know that sharing information in a clear, accessible and timely way is vital.”