In the UK, insurance companies have received a warning from the Financial Conduct Authority (FCA) after it was discovered that their most vulnerable clients were not treated properly.
Following a study of the sector, the FCA advised home and auto insurers in the UK to immediately enhance how they manage customer claims and treat vulnerable consumers better.
The FCA examined how insurers were conducting business after seeing a rise in the number of complaints it received about insurance claims. Infractions such claimants not obtaining the proper settlement amounts and “lengthy” complaint handling times were revealed in the regulator’s study.
The FCA discovered several instances where clients were given offers from insurers after their automobile had been written off that were below its fair market value. Because these activities are against its guidelines, offending insurers were required to make these errors right and give compensation to some of the impacted clients.
Some businesses also struggled to recognize vulnerable clients who required extra help. All businesses that violated the FCA’s guidelines will face consequences as a result.
Customers have been instructed to get in touch with their insurance provider to voice their complaints if their claims have been denied or handled poorly.
“Timely and fair claims handling is especially important during the cost of living squeeze,” said Sheldon Mills, executive director of consumers and competition at the FCA. Although we have observed numerous businesses treating consumers fairly, we also came across far too many instances of clients not getting the kind of service they are entitled to. We’ve instructed businesses to fix any problems we uncovered. We’ll keep an eye on them to make sure they comply.
For violating firms, “tough enforcement action” is necessary
To assess whether the results that their customers are experiencing are commensurate with their commitments, businesses will need to identify pertinent sources of information in accordance with the Consumer Duty, which is scheduled to take effect at the end of July.
The FCA also noted that, year over year, house insurance premiums increased by 6% in Q1 2023 while automobile insurance premiums increased by 16%. Consumers who are struggling financially as a result of the cost of living problem are feeling these increases, and the FCA is reminding businesses to make sure their products are delivering fair value for all consumers in light of this.
In response to the FCA’s conclusions, Which?’s director of policy and activism, Rocio Concha, provided the following explanation of how new legislation ought to be implemented to safeguard consumers: The information that certain insurers are not treating consumers fairly, especially the most vulnerable ones, raises serious concerns.
“However, despite being alarming, these results aren’t particularly shocking. According to a recent Which? study, one in three homeowners with insurance had to contact them about a claim, and according to data from the Financial Ombudsman Service, auto and building insurance are among the five financial products that receive the most complaints.
These results demonstrate that several aspects of the insurance system currently don’t benefit consumers. The FCA’s new Consumer Duty must be supported by strict enforcement action against businesses that fail to uphold the required standards in order to be fully effective, and the regulator should think about naming insurers who have engaged in unethical behavior so that customers can determine which businesses are most likely to provide a good service.