Home and motor insurers must improve their treatment of vulnerable customers, the City regulator has warned.
The Financial Conduct Authority (FCA) said that, after a rise in complaints about insurance claims, it found there were some instances of lengthy complaint-handling times and people not being given proper settlements.
The regulator said it uncovered cases of motor insurance customers being offered a price lower than their car’s fair market value after it had been written off, which is against FCA rules.
Its review also found that some firms were unable to show they were monitoring customer outcomes well enough, and that better information sharing was needed where insurers dealt with intermediaries to settle claims.
Some firms also failed to show they were adequately able to identify vulnerable customers in need of extra support.
The FCA said customers should contact their insurance company to complain if their claims have been delayed or they are unhappy with how their claims are being handled.
They can also raise a complaint with the Financial Ombudsman Service if they are dissatisfied with the firm’s response.
Firms should consider examples in the context of their preparations for a new consumer duty, which comes into force at the end of July, the FCA said.
The consumer duty sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers’ needs first.
The regulator has provided feedback to individual firms about the poor practices and told firms to address it.
Examples of good practice were also found in the FCA’s review, including payment holidays being offered, fees or excesses being waived and customer support hubs being set up.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Timely and fair claims handling is especially vital during the cost-of-living squeeze.
“While we have seen many firms treating their customers correctly, we found too many examples of customers not receiving the service they’re entitled to.
“Where we found issues, we’ve told firms to put them right. We’ll be monitoring them to ensure they do.”
The firms involved have not been named by the FCA.
The regulator said rising insurance premiums are impacting people who are already struggling with the cost of living.
It said: “Whilst this adjustment of premiums is linked to UK motor and home insurers being expected to make losses in 2022 and 2023, our financial lives survey found that consumers who were female, younger, unemployed, working in the gig economy, renters, or in an ethnic minority group, were more likely to have low financial resilience.
“Premium increases can therefore have a disproportionate impact on these consumers.”
Recent figures from the Association of British Insurers (ABI) indicate that home insurance premiums have increased by 6% annually and motor premiums have jumped by 16% year-on-year.
Our industry knows that these continue to be difficult times for many UK households and businesses, struggling with cost-of-living bills— ABI
Insurers have highlighted the rising costs they are dealing with, such as repair prices and the rising cost of courtesy cars and second-hand cars.
The regulator also said there were large variations in the typical time taken by firms to resolve claims, which could be due to supply chain issues with motor claims, an increasing length of time to agree settlement terms with third parties and some claims such as flooding and subsidence being more complex.
The FCA also noted signs that rejected claims were rising across both home insurance and motor insurance products over the four-month period from August to November 2022.
Firms said this was largely a result of customers making claims for circumstances they are not covered for, it said. One example of this would be people claiming for accidental damage when they had not purchased extended cover.
The regulator said it has reminded insurers of their obligation when advising customers to understand a customer’s demands and needs and only offer products that are in line with them.
The FCA said it will continue to monitor firms. It has also finalised new guidance for insurance firms about how they should support customers.
An ABI spokesperson said: “Our industry knows that these continue to be difficult times for many UK households and businesses struggling with cost-of-living bills.
“As the FCA report makes clear, across the insurance industry firms are supporting customers, especially the vulnerable, through these challenging times. On motor insurance alone, in the first quarter of the year insurers paid out £2.4 billion, the highest quarterly payout since our records began in 2013.
“Anyone concerned about being able to afford their insurance and savings policies should speak to their provider to see what options may be available.”
