FCA Responds to Which? Super Complaint on Home & Travel -

Which? and other consumer activist groups have been critical of the way Home and Travel insurance products are sold, claims processed and pricing complaints. Things like medical conditions definitions and the need for disclosures for example have been a bone of contention for some years. Here’s the latest from the FCA;

We are expanding the significant work we had planned to improve standards in the home and travel insurance markets, following Which?’s super complaint.

While 79% of consumers who make an insurance claim are satisfied with how it was handled, our work shows there’s room for improvement – with 3 in 10 saying there isn’t enough information to judge the quality of different policies.

Over the next year, we will do more to:

Improve claims handling, by reviewing firms’ customer service and delivery and how they oversee third parties that handle claims.
Improve consumer understanding of what their insurance covers, by analysing the different ways firms are selling products.

We’re already seeing industry act on our calls to improve customer understanding. We will use the findings from our reviews to continue working with firms, trade bodies and consumer groups, so people have the right information at the point of sale to make informed decisions.

We will continue to act against insurance firms where we have concerns. Since our review of home and travel insurers in July, we have:

Opened 2 enforcement cases.
Stopped 1 firm from doing business until it fixes the problems we identified.
Launched 3 independent reviews into firms’ systems and controls.
Made 3 senior managers agree to fix problems and consider whether redress is due.

We use the best tools available to us to deliver the fastest results for consumers. That isn’t always through enforcement or market studies, which inevitably take time.

Graeme Reynolds, director of competition and interim director of insurance said:

“We welcome Which? shining a light on issues we identified in home and travel insurance.

“We’ve set out more detail on the action we’ve already taken to fix problems, and we’re expanding our existing workplan to improve the claims process and consumer understanding of their cover.

“We’ll be monitoring consumer outcomes and 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”.

INDUSTRY COMMENT

SICSIC

Following the publication of the FCA‘s response to the Super Complaint, Nadege Genetay, Partner, Sicsic Advisory, said:

“The Financial Conduct Authority (FCA) response to the Which? super-complaint provides an unusual level of transparency regarding firm-specific actions, particularly as enforcement action is rare in this sector. By disclosing that it has use formal regulatory tools against nine firms since its thematic review of 23 home and travel insurers, the regulator is demonstrating a high intervention rate of approximately 40%. We believe that even more firms are impacted, as these interventions do not factor day to day supervision work. While the FCA has rejected calls for a full market study, it has committed to expanding its workplan with a focus on customer service, delivery, and the oversight of third-party outsourcing.

“The industry should note that this expanded focus aims to ensure customers have the right information at the point of sale to make informed decisions. Although the current release does not address proposed changes to the legal framework or new regulatory powers, the FCA remains active in holding senior managers to account for delivering fair value.

“Which? may view this as a partial victory, having successfully pressured the regulator to continue its scrutiny of how insurance firms align commercial objectives with customer outcomes. The FCA seems to have navigated successfully between demonstrating a proportionate approach and responding to legitimate concerns raised by Consumer Groups.“

BROADSTONE

Cormac Bradley, Senior Actuarial Director at leading independent insurance consultancy Broadstone, commented:

“The FCA has reaffirmed its commitment to improving consumer outcomes and understanding in the home and travel insurance markets.

“While much of the regulator’s response highlights existing actions and enforcement measures aimed at raising industry standards – which may leave some consumer groups wanting more – it has set out ambitions to strengthen claims handling and enhance consumer awareness of cover by 2026. These steps are essential to ensure policyholders make informed decisions.

“It is critical that firms handle claims effectively and fairly. Poor practices risk eroding consumer trust and widening existing protection gaps, leaving individuals exposed to negative outcomes. In particular, the use of cash settlements could attract scrutiny given the potential for under-compensation, and outsourcing claims handling may lead to inconsistent service and diminished customer care.

“Equally, if consumers do not fully understand what their policy covers, disappointment and frustration during the claims process are inevitable. Greater transparency and proactive communication will be key to addressing these challenges.”

FAIRER FINANCE

James Daley, managing director of consumer group Fairer Finance, said: “We’re pleased to see that the FCA acknowledge the ongoing problems in the general insurance market. However, their response is unlikely to be sufficient to get to grips with the many and growing problems in this sector. The insurance market is caught in a race to the bottom on price – leading to the hollowing out of products, as well as poorer claims experiences. The solution to this has to start with ensuring that comparison sites give consumers the right information to help them understand what they are buying, and not buying. That needs to include reliable data about which firms are treating customers fairly at claims stage. We also need to look at some minimum standards in areas where hollowing out has gone too far.

“The FCA has at least committed to continuing work streams looking at consumer understanding in this market – including a more detailed look at the link between the sales process and poor claims experience. It’s vital that this strand of work acknowledges and addresses the broader problems caused by hollowing out.

“More broadly, there are also growing issues around how insurance is priced – and the growing poverty premium for those on low incomes. The government side stepped looking at this issue in its recent Financial Inclusion work, as well in the work done by the Motor Insurance Taskforce. It’s vital that the FCA picks up this important issue – so that at the very least we have some more transparency around pricing and consider how to address some of the poorest outcomes that today’s complex pricing strategies are driving.”