Context
The FCA has published a review report from a review of the claims handling arrangements of fifteen home insurance providers and eight travel insurance providers, which outlines examples of good practice and areas for improvement. Whilst the good practice is acknowledged, and examples are included in the review report, the review uncovered concerning evidence of poor claims handling practices.
Key points to note and next actions
Examples of good practice included:
- Well-established claims governance supported by a range of robust claims management information (MI) covering customer outcomes, the MI and data including full heads of claim data, claims costs, forecasts and repudiation rates, complaints data, tracking of customers’ vulnerabilities, customer service ratings, and results from quality assurance checks and audits.
- Multiple oversight mechanisms, such as regular quality assurance checks, customer journey testing and structured meetings, to proactively identify and address issues with third-party claims handlers.
- More customer-centric claims handling policies, and claims handlers being encouraged to look for ways to pay rather than reject a claim.
- A clear and documented approach to cash settlements, considering customer outcomes and individual customer needs.
Areas for improvement and identified poor claims handling processes included:
- a lack of oversight of outsourced services, resulting in poor customer outcomes, delays in settling claims and high complaint volumes;
- insufficient management information resulting in failures to promptly identify and resolve claims handling issues and delays;
- high rejection rates for storm damage claims (only 32% of storm damage claims made to the sample of firms in 2024 resulted in a payment); and
- cash settlements being used without sufficient consideration of whether they are most suitable.
The FCA’s intended / required next steps include:
- providing individual feedback to all firms in the review, in particular where there are concerns that firms are not upholding the requirements of the Consumer Duty or other FCA regulations;
- expecting firms to consider whether their policies are meeting customer needs and whether action is needed to improve consumer understanding of policy wording (particularly in the context of FCA findings on the lack of clarity around wear and tear and storm damage).
- requesting trade bodies act in response to the findings – specifically that they consider the need for any further action in response to findings on storm claims (the FCA would like to see this happen by winter 2025 to help prevent customer harms and to ensure good consumer outcomes); and
- expecting firms to consider whether their use of cash settlements is controlled and monitored appropriately, to meet their obligations under the Consumer Duty to deliver good outcomes (including considering whether the customer is vulnerable and would benefit from insurer support and services to resolve the claim)..