Press release

Financial Conduct Authority must crack down on rogue insurance practices, Which? warns

Which? is calling for the Financial Conduct Authority (FCA) to crack down on bad practices from insurers, as new research from the consumer champion reveals the struggles people face when choosing insurance policies
5 min read
Press Team

Which? is campaigning to fix the insurance market, amid shockingly high claims rejection rates and an avalanche of complaints about appalling customer service and claims handling.

The consumer champion’s latest research highlights the pitfalls consumers face when buying insurance, where limited customer understanding of policy limitations, a lack of clear information about exclusions and confusing or difficult to answer questions can contribute to claims later being rejected, with devastating consequences.Which? believes many insurers are failing to meet their legal obligations under the FCA’s Consumer Duty, which requires firms to focus on customer outcomes by ‘putting themselves in customers’ shoes’ and proactively take action to address poor outcomes.

This is borne out by high claims rejection rates - 37% for buildings-only insurance, 28% for combined buildings and contents insurance and 21% for annual worldwide travel insurance - and the hundreds of yearly complaints to the Financial Ombudsman Service (FOS) about rejected claims, many of which (47% for major insurance products like home, travel and pet insurance) are upheld in favour of customers.The impact of poor treatment from insurance firms can be devastating for consumers. Many have already had a traumatising experience like a fire or flooding at their home - but they also then face crippling financial losses and serious physical and mental health consequences as insurers drag out claims disputes for months or even years.  

This has led a group of home insurance customers who feel they have been treated unfairly to band together for mutual support and to offer advice to customers facing a battle with their insurer. 

Mum-of-two Claire Massey set up the Claim Guardians Facebook group - which has more than 250 followers - after going through “absolute hell” during a 17-month battle to resolve a claim after a fire at her home. She has worked with Which? to campaign for fairer treatment for consumers and has taken the fight against the industry’s bad practices all the way to Parliament.

The latest policy report from Which? shows a majority of consumers (65%) believe that insurance regulations mean products must meet a minimum level of cover and more than half (54%) believe the FCA will ensure that all insurance products provide adequate protection. These expectations are not matched by the reality. When Which? followed a group of 24 people as they chose insurance products, their experiences highlighted issues with the questionnaires used to generate personalised quotes. When questions were difficult to answer, consumers sometimes went with a “best guess”, without necessarily realising that any incorrect answers could invalidate a claim at a later date.A dispute over this kind of questionnaire was at the centre of Ms Massey’s claim battle. Her insurer refused to pay out on the basis that she had not disclosed that part of her property - a separately insured annex - was available to rent through Airbnb.But because she had used a comparison website, Ms Massey had never been asked questions about this kind of short-term letting activity. The FOS eventually found she had answered the questions “entirely accurately” and ruled that the insurer did not have grounds to reject the claim.

Which? is calling for the FCA’s ongoing review of insurers’ claims-handling arrangements to lead to action to address the alarmingly high claims rejection rates consumers are experiencing with home and travel insurance.

This review should lead to action against firms that have not sufficiently addressed persistent issues that are driving high claims rejection rates. This could include not meeting existing requirements to sell products to meet customer needs and the reasonable expectations of their target market, and not supporting customer understanding of key terms and exclusions.

Rocio Concha, Which? Director of Policy and Advocacy, said:

“Too many people are having their claims rejected and enduring appalling treatment at the hands of insurance companies. The impact on their finances and on their mental and physical health can be devastating.

“Our latest research shows how many of the problems people face with insurance can be traced back to a flawed sales process, where firms are failing to support customer understanding of complex terms and exclusions which can sow the seeds for disaster.

“The FCA has the power and responsibility to step in and protect consumers. The regulator must show its teeth and start taking tough enforcement action against insurers that are failing to meet their Consumer Duty obligations, or to comply with FCA insurance rules or wider consumer law.”

ENDS

Notes to Editors

:- Which? is tackling bad practices in the insurance market with the launch of Wrippoff Insurance, an all-too-true parody of the bad experiences many consumers face at the hands of the insurance industry

- The consumer champion is concerned about excessively high amounts of interest being charged to pay monthly for home and motor cover. Customers who pay for cover monthly often do so not out of choice, but financial necessity. Yet in some cases these customers are stung with interest rates of over 30 per cent - comparable with pricier credit card lenders - despite the risk to the insurer being lower

- Insurance customers are also being let down during the claims handling process. Which? research has found that nearly half of motor, pet, home and travel insurance customers experienced at least one issue while making a claim 

- Which? worked with Basis Research to follow 24 participants through the qualitative research task of choosing a home or travel insurance product, then conducted in-depth interviews which explored how they chose the product and their understanding of the coverage they have purchased. 

- Yonder, on behalf of Which?, carried out an online poll with a nationally representative sample of 4,000 UK adults in October 2024. Those who had bought home, car, pet or travel insurance (3,538 people) were asked questions around their attitudes and behaviours towards buying, and asked whether they would expect a typical insurance policy to cover a range of hypothetical claims scenarios.

- Which? track consumer trust in major industries on a quarterly basis using a regular, nationally representative survey of approximately 2,000 consumers. Further detail is available here: https://www.which.co.uk/policy-and-insight/article/consumer-trust-and-concerns-in-november-2024-akP587y98pvS

-  Which? analysed FOS decisions on complaints regarding home, motor, travel and pet insurance, published on their online portal. Complaint issues are based on a label applied by the FOS to each document, which record one of the issues raised by a consumer when the complaint was raised. In 2023, we found that 47% of complaints about declined claims were upheld.

About Which? 

Which? is the UK’s consumer champion, here to make life simpler, fairer and safer for everyone. Our research gets to the heart of consumer issues, our advice is impartial, and our rigorous product tests lead to expert recommendations. We’re the independent consumer voice that influences politicians and lawmakers, investigates, holds businesses to account and makes change happen. As an organisation we’re not for profit and all for making consumers more powerful.

The information in this press release is for editorial use by journalists and media outlets only. Any business seeking to reproduce information in this release should contact the Which? Endorsement Scheme team at endorsementscheme@which.co.uk.