OPINION: Which? demands action against insurers that are poorly handling complaints

Originally published in The Insurance Post on 11 July 2024. Permission to publish opinion piece authored by Rocio Concha, sought and granted on 26 June 2024.

Insurance policies are a bulwark against calamity. A resource to call on when things go wrong. But what happens when those you entrust - and pay - to safeguard against adversity end up causing additional distress?

Last month, Which? released the results of research on insurers causing customers unfair delay or distress and inconvenience. Researchers scoured the Financial Ombudsman Service’s (FOS) database of decisions over the past five years, using AI to examine the text of over 8,500 complaints across motor, home, travel and pet insurance - all upheld in the customer’s favour. 

We looked at the reasons for the Ombudsman siding with the customer and in particular the occasions where it cited the insurer causing unnecessary distress and inconvenience - such as a negative emotional or practical impact, like being left to repeatedly chase their insurer or without a replacement vehicle or hot water while the claim is resolved - or an unfair delay. 

We found that last year, the FOS cited distress and inconvenience caused to consumers 1,321 times, with this harm appearing in 64 per cent of upheld complaints. That was a jump from just over half (53%) of complaints recorded as causing distress and inconvenience in 2019. Last year, insurers caused unfair delays in 800 complaints - nearly two-fifths of which were upheld. That figure in 2019 was 302. 

Some sectors fared better than others. Distress and inconvenience was cited as a reason for upholding the complaint in at least half of those relating to home emergency, car or motorcycle, buildings and contents insurance. Insurers causing distress to customers is unacceptable in any sector, but for products such as home emergency cover, the firm’s actions are likely to have made a bad situation - a broken boiler or a leak, say - even worse for the customer.

Not every consumer knows that the FOS’ services are available to them should their initial complaint about a firm reach a stalemate. That means the real number of people who’ve been caused distress and inconvenience or unfair delay by insurers is likely to be even higher. 

So, what should be done to clamp down on providers behaving poorly? 

Helpfully, the Financial Conduct Authority’s Consumer Duty, introduced last summer, makes clear the regulator’s expectations for firms to avoid causing harm to consumers and to deliver good outcomes throughout the complaints process. The reality, however, is that more specific requirements for insurers predates the Duty - going as far back as 2008 in some cases. 

Clearly, this can’t continue. Encouragingly, the new government has already signalled its intent to task the FCA to investigate issues in the sector, such as affordability. But the regulator should do more to hold firms to its requirements, including the Consumer Duty, taking tough action against those that are persistently falling short. Having claims handled in a fair and timely manner should be the very least customers expect from their insurer.

Which? is so concerned by how poorly insurers are dealing with customers’ complaints that we will be looking more deeply into this issue in the coming months - and encouraging the regulator to hold firms’ feet to the fire. What do good and indeed bad processes look like for handling claims? Are firms properly identifying and supporting customers in vulnerable circumstances? Are firms meeting their requirements under the Consumer Duty and the regulations that preceded it? Given some firms’ track record, these questions need urgent answers.