Some home insurers rejecting as many as two thirds of claims as customers endure nightmare ordeal, Which? finds
Some home insurers are accepting as few as one in three claims and customers are being put through hell to get their properties fixed following fires, flooding and other traumatising experiences, Which? research has found.
Which? experts looked at Financial Conduct Authority (FCA) data on the percentage of customer claims firms accepted and claims complaints as a percentage of all claims, over a two-year period.
Six providers - AA, esure, EUI, Lloyds, Rentokil and Urban Jungle - had a claims acceptance rate of less than 55 per cent.
Lloyds Insurance Group had a claims acceptance rate of 30-35 per cent for buildings-only policies, meaning two in three prospective claimants received nothing following their claim. Of all claims Lloyds received, some 15-20 per cent led to complaints.
Esure and Rentokil both had a claims acceptance rate of 40-45 per cent for buildings-only cover. Esure had a claims complaints rate of 10-15 per cent and Rentokil had a claims complaints rate of 0-5 per cent.Two providers - AA and EUI - had a claims acceptance rate of 50-55 per cent for buildings-only products. Concerningly, for the AA, 25-30 per cent of all claims the firm received resulted in a complaint. For EUI, this figure was 15-20 per cent. Urban Jungle’s claims acceptance rate for combined buildings and contents cover was 50-55 per cent. Claims complaints as a percentage of all claims was 10-15 per cent.
The FCA data also showed that the claims acceptance rates of at least half of firms offering buildings only, or combined buildings and contents policies, appeared to worsen between 2022 and 2023.
For home insurance (combined buildings and contents policies) the overall percentage of claims accepted in 2023 was 72 per cent, down from 76 per cent in 2022.
For car insurance, the percentage of claims accepted was 99 per cent in both 2022 and 2023. For contents-only home insurance cover, the percentage of claims accepted in 2023 was 77 per cent - slightly higher than the 76 per cent of claims accepted in 2022.
For buildings-only cover, the percentage of claims accepted in 2023 was 63 per cent, down from 67 per cent the year before.
Of 33 General Insurance products shown in the data, home insurance products are among the four worst when it comes to paying out claims. While home insurance claims can often be more complex in nature than with other forms of cover, Which? believes these claims statistics show that far too many home insurance customers are being failed by their cover. Whether claims are rejected because of unfair decisions or because customers do not understand what they were covered for, both suggest issues with how firms are meeting regulatory requirements.
The FCA’s Consumer Duty, which came into effect in July 2023, requires firms to deliver good outcomes for their customers and for vulnerable customers to receive outcomes at least as good as other customers. However, insurers have to comply with standards on how they treat customers when handling claims since long before the Duty came into force, especially for those in vulnerable circumstances.
The Consumer Duty also requires firms to design products and services that meet the needs of consumers and sell them to those whose needs they meet. This includes needing to ‘put themselves in customers’ shoes’ when considering if the information they have been provided is sufficient for them to make effective decisions about their purchase.
The FCA has also recently published a review into how well insurers were delivering good outcomes for their customers and found that in many instances firms were not meeting their regulatory obligations. Despite this, some home insurance customers have had particularly gruelling experiences with their insurer after making a claim.
Stephen Adshead was dismayed by his experience with Lloyds Insurance after his house suffered considerable damage from a leak. The leak was so severe inside his house that Stephen and his children had to enter a bathroom with an umbrella. Repair work has cost around £20,000, but Stephen says the sums he has been offered to settle the claim would leave him seriously out of pocket. Despite working as a lawyer specialising in litigation and insurance, Stephen said he has struggled with the claims process and he is still fighting for a fair settlement two years on.
In response, Lloyds said: “We are unable to comment on the details of this case as it is part of ongoing legal proceedings.”
Which? understands that Lloyds are in the process of settling the outstanding part of Stephen's complaint as agreed with the FOS and are waiting for him to provide the information requested.
Which? is also concerned that some firms are not taking due care with the claims of customers with characteristics of vulnerability.
Paul McHugh, who has autism, suffered a house fire last year and believes he was let down badly by Frontier, his insurer. He claims they did not repair his house or agree on a solution, which Paul believes breaches his contract. Paul also claims they cut off funding for his alternative accommodation, even though the contract said it should be ‘unlimited’ and have underpaid for necessary repair work.There remains disagreement between Frontier and Paul over the fairness of the settlement being offered and the claim has taken a long time to resolve. Paul says he has not been fully reimbursed for various expenses that he feels he was entitled to (such as alternative accommodation) and feels this money was withheld in a bid to "bully" him into accepting a cash offer. Paul says Frontier paid him £200,000 without his agreement or consent, which he claims is woefully insufficient and he is still battling Frontier.
Frontier told Which? they have settled thousands of claims with happy customers. Frontier said Paul wanted to reinstate his property above its pre-fire condition and it followed its standard approach in that case to offer a cash settlement which aligns with what Frontier would pay its own approved contractors. Frontier did not respond to us about paying for Paul's alternative accommodation but it did say it had already paid "substantial sums".
Which? believes the FCA must get tough with firms that fall short of regulatory requirements. Insurers have long been held to industry standards, many of which predate the Consumer Duty, and yet issues persist.
The time for regulatory reviews without meaningful action has come to an end. The FCA’s ongoing review of insurance claims-handling must lead to enforcement action to address failings and robust interventions to prevent these from happening in the future. Insurance customers urgently need much better service than they are currently receiving.
Rocio Concha, Which? Director of Policy and Advocacy, said:
“When home insurance customers take out a policy, they don’t expect to have to claim - let alone face a protracted ordeal with their insurer just to get justice.
“That customers who’ve been through hellish ordeals, such as a fire in their house, face lengthy battles with their insurer just to have their claim accepted is extremely concerning.
“The FCA’s requirements on insurers have been clear for some time: firms must deliver good outcomes for customers, especially those in vulnerable circumstances. Our research suggests that some firms aren’t following these requirements - and the regulator shouldn’t hesitate to take action against those falling short.”
-ENDS-
Notes to Editors
Which? experts reviewed the FCA’s General Insurance Value Measures, looking specifically at claims acceptance and complaints rates by insurance sector and individual firm.
Which? has recently launched a campaign to End the Insurance Rip-Off
Case studies
Stephen Adshead
Stephen Adshead was dismayed by his experience with Lloyds Insurance after his house suffered considerable damage from a leak. The leak was so severe it rained for several days inside his house and Stephen and his children had to enter a bathroom with an umbrella. This was the start of a saga that began two years ago and is no closer to conclusion.After notifying Lloyds, Stephen's house was visited by a surveyor who, of his own accord, and following a visit to his 10 year old daughter’s bedroom, mistakenly reported subsidence. This was unrelated to the leak and Stephen's policy was wrongly cancelled as a result. Stephen is a litigation lawyer and insurance specialist so was able to get his insurance policy reinstated.
He has however not been as successful getting the insurer to act fairly and responsibly in connection with the significant leak, even with his specialist skills, remarking what chance do others have. The cost to Stephen from the leak has necessitated over £20,000 worth of work, but he has been offered 'without any real justification' substantially lower sums by Lloyds. He has been to the Financial Ombudsman Service (FOS), sued Lloyds, and in the context of that claim, exchanged over 30 emails with the solicitors for Lloyds, but he has still been unable to get that justification from the insurer. Stephen believes his intense frustration must be a fraction of what non-solicitors go through if their house burns down or they are robbed or they too have a leak and their insurance company does not honour a policy.
Paul McHugh
Paul McHugh, who has autism, saw his house suffer a fire last year and he believes that he was let down in three ways. First, Frontier did not repair his house or agree on a solution, which Paul believes breaches his contract. Second, Paul says that after a while, Frontier refused to pay him any money to live in alternative accommodation, even though the wording in his policy said money for this is 'unlimited'. Third, Paul believes he has not received sufficient money for various work which needs to be carried out by contractors and experts. Paul says that the amount of money paid to him - £200,000 - is not fair and just, given that the cost of repairs are about £350,000. Paul believes he should continue to receive rent until all the work has been carried out. He feels that he is being 'bullied' into accepting a lower offer. Paul took his case to the FOS.
Right of replies
A spokesman for AA Insurance said: “We will always pay out fully on claims where the customer has the necessary cover. “With home insurance, and buildings insurance in particular, customers will often make an enquiry or a claim without being sure whether they are covered – this can lead to artificially low acceptance levels. Our product is designed to deal with certain types of incident and not others. Most significantly, it is not designed to cover wear and tear, or to fund the replacement of items that have been poorly constructed or that have come to the end of their useful life. “There is an industry wide challenge to help improve customer understanding of what home insurance products cover and, crucially, what they do not. It is also important that, when insurers decide they are unable to pay a claim, it is explained fully and straightforwardly to customers.
“The level of complaints received during 2023 was higher than we would have liked, in part a reflection on increased service due to weather events. We have made significant improvements to our services and have seen the level of complaints come down, while our customer feedback improves. We will continue to invest in delivering the outcomes customers deserve, and that they are entitled to expect.”
A spokesperson for EUI said: “We recognise that home insurance can be a complex product and customers often contact us with a general query regarding cover following an incident. If they are informed that it’s not covered and therefore don’t make a claim, we still record this as a rejected claim. “We do this because it provides insight into ways we can improve and further educate customers of what is and isn’t covered, and how to protect their property, especially around storm events. For example, where a property is damaged due to wear and tear rather than an accident or weather incident, or where someone’s fence is damaged during a storm.
“This leads to an increase in the number of unpaid incidents compared with other insurers, and not a reduction in the number of claims we pay out for, which is comparable to peers.
“We never like to hear that a customer is unhappy with the service they received but we are rigorous in recording any dissatisfaction by customers as complaints. We are always striving to improve our products and service, and this helps to identify ways we can do this.
“We’re confident that we deliver good customer outcomes, and that our GIVM results reflect our aim to provide an easy claims registration process, and thoroughly record incidents and complaints. More comparable indicators of outcomes such as paid claims frequency, customer retention and feedback are aligned to our peers and other insurance products.”
Commenting on Paul McHugh’s case, a spokesperson for Frontier said: At Frontier, we are committed to offering value-driven products that provide essential support when our customers need it most. We work closely with trusted claims partners to deliver reliable service, and our experienced claims experts work continuously to refine our claims process and enhance the quality of service delivered on our behalf.More specifically, as Mr McHugh has clearly provided you with legal authority to act on his behalf and thereby waived any legal privacy obligations we may have owed to him, we would ask you to note the following:
The customer on whose authority you now act, has chosen not to have the property reinstated to its pre-loss condition, and in these circumstances, our standard approach is to offer a cash settlement covering the insured damage.
Our liability for settlement aligns with what it would cost our approved contractors to complete the necessary reinstatement work, ensuring that our customers receive fair compensation aligned with actual service costs.However, due to certain significant disclosure failings which came to light during our claim investigation, and having regard to the range of statutory remedies available to Insurers in such circumstance under the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA), as a sign of goodwill, we have chosen to waive our rights under CIDRA 2012 due to the size of loss encountered by Mr McHugh. The customer would therefore need to make a financial contribution toward fully reinstating his own property to its pre-loss condition over and above the substantial offer we have made.
Indeed, it also warrants mention that the substantial sums we have already paid where paid to Mr McHugh’s Claims Consultants who also acted on his behalf and presumably, with his full negotiating authority at that time.
Finally, in the interest of balanced inquiry, fair reporting, and our right of reply, we would ask you to note that to date, and several months since Mr McHugh was provided with individual responses to his separate detailed complaints, he has chosen not to exercise his own statutory right to seek a cost free adjudicative remedy via FOS, or through the civil courts.Reinstatement was never possible as the customer wanted to build the property back differently, which would put them in a better position prior to the claim. That was the customer's choice, not ours.
There are 2 surveyors, both with differing opinions. We based our liability on our professional’s opinion of the scope of works which was then priced according to the rates we would pay our contractors. These differences have never been resolved but the customer is only entitled to what it would cost our contractors to do the work.We did not arrange for the loss adjuster to be changed, the customer insisted that our professionally qualified adjuster was removed.
This inevitably caused some delays and increased our costs for dealing with the claim. The time frames of settling this claim are due to it being a complex loss, and the parties needing time to consider their options.The reported subsidence is subject to a second claim, where the cause of movement is unconfirmed.There were a number of issues, the most significant being the non-disclosure of the presence of Solar panels. This materially impacted the underwriting risk to this address which was discussed by Mr McHugh in the early days of the claim.
A spokesperson for Urban Jungle said: "Urban Jungle and its insurers are committed to paying 100% of valid claims. We also carefully benchmark our cover, and are confident that the cover on this product is the same or better than those offered by our peers. Differences in the data are driven by technical differences in how we record the data vs our competitors. We are also constantly iterating and improving our products, and listening to customers about how to keep getting better."Commenting on Stephen Adshead’s case, a spokesperson for Lloyds Bank Home Insurance said: “We’re unable to comment on the details of this case as it is part of ongoing legal proceedings.”
A spokesperson for esure said: “We are aware that some companies record and report data differently, which leads to an inconsistency across the sector with regards to acceptance rates. These inconsistencies mean like-for-like peer comparisons risk providing an inaccurate representation.“esure takes a very comprehensive approach, which includes recording enquiries as a claim, even if the customer does not have cover or is just asking us a query. Our most common reason for turning down claims is where there is no cover in the policy e.g. where additional accidental damage cover has not been taken out, storm damage to gates and fences, or if damage is caused by wear and tear. We categorise these factors as claim events but understand they are not typically categorised as claim events across the industry.“esure regularly reviews products and conducts customer testing to ensure our products provide fair value to customers. We analyse various customer metrics and external validation, such as our TrustPilot score (4.46 out of 5 for October) to ensure we are listening and responding to customer feedback.”
A spokesperson for Lloyds Bank insurance said: “Not all insurance providers record claims data in the same way so these figures shouldn’t be compared like for like. Our customers can rest assured that our policy cover is good relative to the market and our payout ratio is in line with the industry average.”
Rentokil Insurance did not provide a comment for publication on its FCA performance data.
Which? asked the FCA if it could comment on the worsening trends in home insurance claims statistics and whether it considered current standards from home insurers to be acceptable. A spokesperson said: “We’re aware insurance complaints are rising, and we’ve taken direct action with firms where we’ve seen poor customer service. “Complaints handling is a priority for us. We’ve told firms what we expect and we’re monitoring the issue across the sector to make sure claims are being dealt with promptly and fairly”.
According to the FCA’s guidance to firms on reporting claims data, all firms should include - as ‘rejected claims’ - cases where the customer contacts the insurer to make a claim and is advised at that time that their loss is not covered or the claim is below the policy excess.
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