The Financial Conduct Authority (FCA) has issued a warning to insurance firms in the UK, following the discovery of inadequate treatment of their most vulnerable customers.
Home and motor insurers in the UK must quickly improve how they handle customer claims and provide better treatment of vulnerable customers, the FCA has urged following a review of the industry.
After witnessing an increase in the number of complaints it received about insurance claims, the FCA reviewed how insurers were operating. Claimants not given receiving correct settlement amounts and “lengthy” complaints handling times were some of the offences unveiled in the regulator’s report.
The FCA found a number of instances in which customers were offered a price lower than their car’s fair market value by insurers after it had been written off. Offending insurers were ordered to put these mistakes right and provide redress to some of the affected customers because these actions are against its rules.
Some firms were also unable to adequately identify vulnerable customers in need of additional support. In response, the FCA will take action against all firms that broke its rules.
Customers have been advised to contact their insurance company to complain if their claims have been delayed or if they are unhappy with how their claims are being handled.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Timely and fair claims handling is especially vital during the cost of living squeeze. While we have seen many firms treating their customers correctly, we found too many examples of customers not receiving the service they’re entitled to. Where we found issues, we’ve told firms to put them right. We’ll be monitoring them to ensure they do.”
“Tough enforcement action” required for offending firms
As per the Consumer Duty, which is set to begin at the end of July, firms will need to identify relevant sources of information to enable them to assess whether the outcomes that their customers are experiencing are consistent with their obligations.
The FCA also identified that in Q1 2023 home insurance premiums rose six per cent, while motor premiums were up 16 per cent year on year. These increases are being felt by consumers who are struggling with the financial impact of the cost of living crisis and the FCA reminds firms to ensure their products are providing fair value for all consumers with this in mind.
Rocio Concha, director of policy and advocacy at Which?, reacted to the FCA’s findings, and explained how new regulations should be enforced to protect consumers: “It’s extremely concerning to hear that some insurers are breaking the regulator’s rules when it comes to treating customers, including vulnerable ones, fairly.
“Yet while concerning, these findings aren’t particularly surprising. Recent Which? research found that one in three home insurance customers were forced to chase their insurer over a claim, and figures from the Financial Ombudsman Service show that car and buildings insurance are among the top five most complained about financial products.
“It’s clear from these findings that parts of the insurance market aren’t currently working for consumers. For it to be properly effective, the FCA’s new Consumer Duty must be backed by tough enforcement action for firms who fall below the required standards, and the regulator should consider naming insurers who have carried out bad practices so consumers can work out which companies are most likely to offer a good service.”