Rising premiums in the insurance industry are one of the prime reasons trust in the sector has hit an all-time low according to Which?, the consumer advisor.
Which?’s monthly Consumer Insight Tracker found that trust in the insurance industry has dropped to a confidence score of -24. Since it started being tracked in August 2020, the industry has never seen 44 per cent of consumers say they do not trust insurance companies. Similarly, this is the first time only 21 per cent of consumers said they did trust them – a new low record.
Rocio Concha, Which? director of policy and advocacy, said: “With insurance premiums continuing to soar and many consumers reporting bad experiences with their insurer, it’s hardly surprising that trust in the industry has continued to fall.
“Insurers need to ensure they are offering value for money and that their customer service is up to scratch when you need to make a claim. The FCA should not hesitate to take action against any firms falling short.
“Anyone who isn’t happy with their current insurer should consider switching or haggling. Our research shows the price quoted by your insurer isn’t necessarily the best price available and doing your research on comparison sites, haggling and switching can offer savings.”
Impact of rising premiums
Which? found that one sector which was being seriously impacted by rising premiums was car insurance. In fact, according to Confused.com, the cost of car insurance went up by almost 60 per cent in the year to October 2023. The average cost of a comprehensive car insurance policy increased by £338 from last year, totalling £924.
Many customers question why their premiums have risen so dramatically. One man from Yorkshire said: “I think insurance is overpriced, and that prices have increased a lot over the last year or so without any real reason.” Unsurprisingly, a lack of explanation for the premium rises may lead to many distrusting the industry.
In an age where consumer welfare is a top priority, many consumers feel the insurance industry is not putting enough emphasis on it. They feel profit is being prioritised over it. One man aged 34-44 said: “Insurance companies go to great lengths to maximise their profits and minimise the odds of having to pay out to customers. It has nothing to do with protection and everything to do with profit over the welfare of people.”
For others, their reasons for not trusting insurance companies to act in their best interest came down to their personal experiences or what they have heard from others about making a claim.
A woman from the North East said: “I’ve had a really bad experience in the past where they didn’t have my best interests at heart and [my claim] rumbled on for about two years”.
A man from Wales said: “Every time I have made a claim they have always tried to find something to void the policy so they don’t have to pay out.”
Change through Consumer Duty
Of 34 insurance types the Financial Conduct Authority (FCA) publishes data on, standalone buildings and contents cover are among the five products least likely to pay claims. During 2022, some 99 per cent of car insurance claims were accepted – but this figure was just 68 per cent for standalone buildings cover, which covers life-changing events like fire or flood.
Earlier this year, the FCA, introduced a new Consumer Duty with a set of higher and clearer standards of consumer protections which require businesses to put their customers’ needs first.
Insurers need to ensure they are offering value for money and support their customers’ understanding, including when they need to make a claim. The FCA must monitor firms’ performance and act swiftly against any firms that fall below the required standards.