Insurers advised to make journey and residential insurance policies simpler to know | EUROtoday

Insurers have to do extra to enhance how they deal with claims and make it clearer to clients what their insurance policies cowl, the UK’s finance regulator has mentioned.

The Financial Conduct Authority (FCA) was responding to a “super-complaint” by shopper group Which? concerning the residence and journey insurance coverage sectors.

The regulator acknowledged some issues wanted addressing, and mentioned it will develop its scrutiny of how claims are processed and the way clear insurance policies are to clients.

Consumer teams mentioned the FCA should observe this up with sturdy motion and see it as a primary step to elementary reform.

An excellent-complaint is uncommon, and solely utilized by shopper teams after they imagine numerous individuals are being considerably harmed by practices throughout a selected sector.

Consumer group Which? had argued that the house and journey insurance coverage sectors have been “broken”. It mentioned that in some instances making a declare to an insurance coverage firm could possibly be a worse expertise than the misery of the unique incident.

The super-complaint was primarily based on three areas of concern. The first was the way in which that claims are dealt with, with many being outsourced by insurers to specialists.

The second was the gross sales practices of insurers, which the buyer group argued have been inappropriate and led to widespread confusion over what was lined in a coverage.

Finally, it accused the FCA, because the regulator, of failing to offer an applicable diploma of safety for customers.

Millions of individuals throughout the UK take out insurance coverage insurance policies they hope they may by no means want to attract on.

Some 22 million residence insurance coverage insurance policies have been in drive final yr, with customers paying greater than £7bn in premiums. During the yr, customers made virtually 900,000 claims, with insurers paying out a complete of £3.2bn.

There have been greater than 6.8 million journey insurance coverage insurance policies, with premiums of £1.2bn paid final yr. Some 600,000 claims led to payouts of extra £400m.

But Which? highlighted that acceptance of claims and subsequent payouts have been a lot much less probably amongst residence and journey insurance coverage than motor and pet insurance policies.

The FCA discovered that in 2024, 99% of motor claims have been accepted, in contrast with 80% of standalone single journey journey claims and 74% of residence content-only claims.

The regulator mentioned that this, partially, mirrored the decrease ranges of understanding amongst customers of what their insurance coverage coverage lined.

Graeme Reynolds, director of competitors on the FCA, mentioned the regulator would “expand our existing workplan” to make sure enhancements to the claims course of and shopper understanding of their cowl.

“We will continue to hold firms and their senior leaders to account for making improvements, to help build trust and make sure people get fair value insurance,” he mentioned.

The Association of British Insurers (ABI), which represents corporations, mentioned the enhancements demanded by the FCA have been “a top priority” for the sector.

The FCA mentioned it had already addressed varied areas of concern within the sector, however shopper teams – together with Which? – mentioned extra motion was wanted.

Rocio Concha, Which? director of coverage and advocacy, mentioned the FCA should now result in significant change for customers.

“These issues have been allowed to fester for years, so the FCA must now seize the opportunity to take strong action to stamp out widespread bad practice and issues with how the markets are working,” she mentioned.

James Daley, managing director of shopper group Fairer Finance, mentioned: “The [FCA] response is unlikely to be sufficient to get to grips with the many and growing problems in this sector.

“The insurance coverage market is caught in a race to the underside on value – resulting in the hollowing out of merchandise, in addition to poorer claims experiences.”