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UK consumers are experiencing deteriorating levels of customer service from their insurers despite huge increases in the cost of obtaining cover, a damning new report has concluded.
Almost half (48 per cent) of people making a claim on their home, travel, motor or pet insurance policy experienced at least one problem with their claim, according to an in-depth analysis of the claims handling process carried out by Which? the consumer group.
Common problems included customers having to chase insurers repeatedly for updates and being asked to submit supporting paperwork multiple times. The report also found widespread evidence of insurers not identifying and responding appropriately when customers were struggling as a result of the incident that led to their claim.
People who were severely impacted by the incident that led to their claim — be it a car accident, home emergency or ruined holiday — were nearly twice as likely to experience problems with the claims process, despite increased obligations to protect vulnerable customers under the Consumer Duty, a new set of rules introduced last year by the Financial Conduct Authority (FCA), the regulator. Where insurers brought in third parties to deal with assessing claims, Which? said these problems were particularly acute.
“At a time when many consumers face soaring premiums, it’s clear they’re being ripped off — either by abysmal claims handling that doesn’t match up to the price they’re paying, or by unjustifiably high premiums,” said Rocio Concha, director of policy and advocacy at Which?
Some customers felt harassed to provide difficult-to-obtain information about seriously ill or deceased family members before being told the records were not necessary after all. One woman developed asthma when she was forced to live in a mould-ridden home while her claim dragged on for months.
Of the people who had their claims rejected, one in four said they did not understand why, potentially making it harder for them to raise a complaint via the Financial Ombudsman Service (FOS), who nevertheless reported a 22 per cent increase in the number of insurance complaints it received between 2019-20 and 2022-23.
Which? based its research on a survey of more than 3,000 consumers who had made an insurance claim in the past three years, plus analysis of over eight and half thousand complaints made to the FOS.
The consumer group has called for the FCA to improve its supervision of insurers’ claims handling practices to prevent harm from arising.
Motor and home insurance premiums have soared in recent years as insurers struggle to cope with the increased costs of replacement cars, vehicle parts and labour — especially for electric vehicles — as well as rising numbers of extreme weather events.
The sector is also steeling itself for potential government intervention, after the Labour party promised to tackle the “soaring cost of car insurance” in its election manifesto.
“Today, we say enough is enough,” Concha added. “The rules for insurers are clear, but the insurance rip-off will not end unless the regulator takes meaningful action against firms that consistently fall short.”
The FCA said: “Our rules mean that insurers should be handling claims fairly and quickly, without putting any barriers in place. Any third parties involved must be overseen by the insurer. We are already actively monitoring claims across the sector and are taking action against firms who fall short of what we expect.”
