Car insurance firms falling short of consumer duty standards

Three quarters of car insurance customers in the UK said they were not given an explanation by their insurer for rejected, partially accepted or disputed claims, new research by Which? has found. Photo: Getty (esp_imaging via Getty Images)

Customers are about to get more help with their insurance claims when the Consumer Duty rule is introduced by the Financial Conduct Authority (FCA) later this month as consumer group Which? found some firms are falling short on their duties to consumers.

The "higher and clearer" consumer protection standards are meant to ensure clearer communication around claims decisions.

“Firms should ensure they support consumer understanding and deliver good outcomes throughout the claim journey, through timely and appropriate communications,” the FCA said.

It comes as three quarters (77%) of car insurance customers in the UK said they were not given an explanation by their insurer for rejected, partially accepted or disputed claims, a Which? survey revealed.

The consumer group surveyed over 2,200 car insurance customers and over 1,500 home insurance customers, who had made a claim within the last two years, in November 2022. In March 2023, 804 travel insurance claimants, who had made a claim within the last two years, were also surveyed.

When Which? asked what the outcome of the claim was, one in seven (14%) car insurance claimants reported that their claim was either partially accepted, rejected or in dispute. This was the case for more than a fifth (22%) of home insurance claimants and almost two in five (38%) travel insurance claimants.

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Meanwhile, over half (56%) of home insurance claimants and more than four in 10 (43%) travel insurance claimants whose claim was not fully accepted said they did not receive an explanation as to why.

According to the FCA’s review, the number of rejected claims rose by over half (57%) for home insurance and a quarter (24%) for car insurance between August and November 2022.

Data from the regulator indicates that most complaints made to insurers (62%) are upheld in favour of the customer. However, just getting a complaint off the ground will be hampered if a claimant cannot detail where they and the insurer disagree.

Which? said anyone who feels they are being treated poorly by their insurer should consider switching.

“No one wants to be in the position where they have to claim on their insurance — still less have that claim be turned down. But not getting an explanation for why a claim hasn't been accepted in full isn't just frustrating — it puts you, the consumer, at a serious disadvantage," Sam Richardson, deputy editor of Which? Money, said.

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“Claimants who don’t get the full picture from their insurers will struggle to take their claim to the Ombudsman, as they don’t have much information to prove where they and their insurer disagree,” he added.

Richardson also said that insurers need to let claimants know precisely why their claims are not being accepted in full.

Moreover, he said the FCA should clamp down on firms that fall below the required standards when the Consumer Duty rule comes into force.

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