The Financial Conduct Authority (FCA) is preparing to step up its disruptive activities across the insurance industry. They’re intended to reduce confusion when filing a claim and improve consumer understanding of their coverage under the policy. Graeme Reynolds, the FCA’s director of competition, recently outlined intentions to build on their current workplan. This forward-thinking approach will help better direct product innovation to safely meet consumer needs.
Over the last 12 months, consumers made almost 900,000 claims, leading insurers to pay out over £3.2 billion in their total. Of these claims, around 600,000 resulted in payments of well over £400 million. This just exemplifies the sheer volume of claims and the immense financial weight being placed on insurers. It highlights the desperate need for specificity in policy.
As of last year, there were just over 22 million home insurance policies in force in the state. Consumers paid more than £7 billion in premiums for this specialized coverage. Further, the travel insurance industry declared over 6.8 million policies written, resulting in £1.2 billion travel insurance premiums. Yet even with these numbers, complaints about claims handling and the aggressive sales tactics used by insurers are on the rise.
The FCA’s recent response to a super-complaint filed by several consumer advocacy organizations has been criticized. James Daley, managing director of Fairer Finance, is skeptical that the FCA’s actions go far enough. He argues that these moves miss the mark in addressing the plethora of increasing issues related to the insurance market. The super-complaint identified three primary areas of concern: claims handling, sales practices, and another unspecified issue.
Warnings over aggressive sales tactics have been repeated by Rocio Concha, director of policy and advocacy at consumer group Which? She noted that these practices have led to much more widespread confusion and frustration for consumers about what their policies even cover. Insurers have widely offloaded claims handling to third-party specialists, adding another layer of complication to the process.
“These issues have been allowed to fester for years, so the FCA must now seize the opportunity to take strong action to stamp out widespread bad practice and issues with how the markets are working.” – Rocio Concha, Which? director of policy and advocacy.
Reynolds promised stakeholder that the FCA would clamp down on firms and their senior executive teams when more needed to be done for consumer protection. He stated, “We 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.”
