UK Watchdog Faces Calls to Crack Down on ‘Abysmal’ Insurance Claims Handling
In a scathing report highlighting consumer frustration amid rising premiums, the consumer advocacy group Which? has urged the UK’s Financial Conduct Authority (FCA) to take “meaningful action” against insurers accused of “ripping off” customers through poor claims handling practices. The call, detailed in a July 2024 policy paper, comes as households grapple with soaring insurance costs—up 100% for car policies and over 25% for home renewals in some cases—while facing rejection rates as high as 20-30% for certain claims.
Background and Key Findings from Which?’s Report
Which? analyzed stories from over 1,000 affected consumers, revealing systemic failures in how insurers process claims for home, travel, and motor insurance. Key issues include:
- Delays and Denials: Claims often take months to resolve, with some rejected on technicalities despite valid coverage. For instance, flood victims waited up to six months for payouts, exacerbating financial distress.
- Lack of Empathy: Vulnerable customers—those dealing with trauma from events like house fires or accidents—reported being treated insensitively, with automated responses and minimal support.
- Low Acceptance Rates: Home insurance claims were accepted only 70-80% of the time, while travel claims hovered around 75%, far below what consumers expect given premium hikes.
- Premium vs. Service Mismatch: At a time when annual premiums have surged (e.g., average motor insurance up 18% in 2024), Which? argues customers are overpaying for subpar service.
Rocio Concha, Which?’s director of policy and advocacy, described the findings as a “shocking picture” of insurers failing to meet the FCA’s Consumer Duty rules, introduced in 2023 to prioritize fair customer outcomes. She emphasized: “People in vulnerable circumstances… are being failed by their insurers.”
Insurers’ Response and FCA’s Stance
The Association of British Insurers (ABI) countered that most claims (over 90%) are handled swiftly and accepted, with customer support as a top priority. However, they acknowledged room for improvement in complex cases.
The FCA has already signaled stronger oversight:
- In July 2025, it urged motor insurers to enhance claims processes, citing “concerning evidence” of poor practices driving premium inflation through inadequate management information.
- A dedicated report on claims speed and vulnerable customer treatment is slated for release in the second half of 2025.
- Earlier actions include rebukes in August 2024 for mishandling vulnerable customers and complaints, with warnings of enforcement against untimely settlements.
The watchdog’s Consumer Duty framework requires insurers to demonstrate proactive support, and Which? is pushing for fines, mandatory training, and clearer rejection criteria to enforce compliance.
Broader Implications for Consumers and the Industry
This push reflects growing scrutiny on the £200 billion UK insurance market, where complaints rose 15% in 2024 per Financial Ombudsman Service data. Vulnerable groups, including the elderly and low-income households, are hit hardest, with poor handling compounding cost-of-living pressures.
Tips for Policyholders:
- Shop Around: Use comparison sites like MoneySuperMarket or GoCompare to avoid auto-renewal traps.
- Document Everything: Keep records of incidents and communications to strengthen claims.
- Escalate Quickly: If denied, appeal via the insurer’s process, then contact the Financial Ombudsman Service (free service) within six months.
- Check Coverage: Review policies for exclusions, especially amid climate-driven claims spikes.
As the FCA’s 2025 report looms, expect potential reforms like standardized timelines (e.g., 30 days for simple claims) and higher penalties—up to 10% of revenue for repeat offenders. For the latest, monitor FCA updates or Which?’s site. If you’d like details on specific insurers or related cases, let me know!