Unexplained insurance decisions leaving customers powerless

A lack of transparency in the insurance industry is leaving policyholders in the dark when it comes to claim rejections. 

Recent research conducted by Which? Money, surveying 2,223 car and 1,517 home insurance claimants in November 2022, and 804 travel insurance claimants in March this year, reveals that a significant number of customers are being denied explanations when their insurers don't fully accept their claim. 

While the majority had their claims fully paid, some were paid only in part, outright rejected, or were in dispute.

Of these, some 77% 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.

Here we explain why this is unfair on consumers, why insurers could be caught out by new rules, and what to do if an insurer doesn't pay out your claim. 

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When claims go wrong

Insurers may reject claims for various reasons, including policy exclusions, inadequate documentation, non-disclosure of relevant information (such as pre-existing medical conditions), policy limits and excesses, misinterpretation of policy terms, and cases of fraudulent claims.

However, your chances of having a claim turned down are relatively low.

In 2020-21, car insurance had a claims acceptance rate of 97%, meaning that the vast majority of motor insurance claims were accepted, according to the Association of British Insurers. 

Domestic property claims (home insurance) had a claims acceptance rate of 79%, while travel insurance had an acceptance rate of 81%.

However, this disguises a huge variety of claimant experiences. The Financial Conduct Authority (FCA) recently urged insurers to improve their treatment of vulnerable customers and enhance their claims handling procedures. 

The FCA's investigation uncovered a worrying increase in rejected claims, with home insurance rejections rising by 57% and car insurance rejections by 24% between August and November 2022.

• Find out more: Car and buildings insurance complaints hit five-year high – what were most disputes about? 

Lack of transparency in claim rejections

This lack of reasons for claims being turned down is concerning, as it leaves policyholders clueless about the reasons behind the decisions made by insurers.

While the majority of complaints made to insurers (62%) are eventually upheld in favour of the customer, according to the FCA, initiating a complaint becomes challenging when policyholders struggle to clearly articulate the areas of disagreement with the insurer.

You need to complain to an insurer before you're able to escalate your complaint to the Financial Ombudsman Service (FOS), a free alternative to the courts.

It's possible that rejected claimants are unable to launch complaints about decisions that might later be overturned by the insurer or the FOS.

This could prove a problem for insurance firms, too. Under the Consumer Duty - a set of standards of consumer protections due to come into force later this month - providers will be expected to 'support consumer understanding and deliver good outcomes throughout the claim journey, through timely and appropriate communications.' 

What insurers say

When we approached them with our findings, the Association of British Insurers (ABI) noted the vast majority of claims were accepted, but acknowledged 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.’ 

It added that unhappy claimants should first go to their insurer, then to the FOS. ‘Insurers will always aim to deal with complaints as swiftly as possible and will work with the FOS to understand where any learnings can be made.’

• Find out more: How to take a complaint to the Financial Ombudsman Service 

How to make an effective insurance claim

When it comes to making an insurance claim, following the right steps can help ensure a smoother process.

Car insurance

1. Notify your insurer promptly after an accident or damage to your vehicle.
2. Gather important details, including the other party's contact and insurance information, as well as any witnesses' details.
3. Take photos of the scene and the damage to support your claim.
4. Provide accurate information about the incident, including a detailed account of what happened.
5. Cooperate with your insurer and follow their instructions.
6. Keep records of all expenses related to the incident, such as towing or rental car costs.

Home insurance

1. Contact your insurer as soon as possible to report the incident and make a claim.
2. Provide accurate and detailed information about the event, including photos or evidence if available.
3. Keep records of any correspondence, such as emails or letters, related to your claim.
4. If repairs are needed, get multiple quotes and discuss them with your insurer before proceeding.
5. Be prepared to provide any necessary supporting documents, such as proof of ownership or receipts for damaged items.
6. Keep track of any expenses incurred due to the incident, as you may be eligible for reimbursement.

Travel insurance

1. Contact your insurer's claims helpline as soon as possible if you encounter an issue while travelling.
2. Keep all relevant documents, such as receipts, medical reports, or police reports, as evidence for your claim.
3. Follow the insurer's instructions regarding obtaining medical treatment or assistance during your trip.
4. Notify your insurer immediately if you need to cut your trip short or make any changes to your travel plans.
5. Provide accurate and complete information about the incident or medical condition when making your claim.
6. Keep copies of all claim-related documents and communications for future reference.

Remember, it's essential to familiarise yourself with your specific policy terms and conditions, as they may vary. Following these guidelines can help streamline the claims process and increase the likelihood of a successful insurance claim.

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