Which? is demanding the Financial Conduct Authority (FCA) takes action to improve standards in the home and travel insurance markets.
Following a year of ‘extensive’ investigations, the consumer body said it has found ‘systemic problems’ with how policies are sold and explained, and also with how claims are handled.
In one instance, it found that insurer Axa had unfairly rejected a woman’s claim after her plane to Egypt did a U-turn two hours into the flight due to a technical fault, resulting in her week-long holiday being cancelled. Axa argued that the trip had ‘technically’ gone ahead and refused her claim for £140 out-of-pocket expenses.
Following Which’s intervention, Axa reversed its decision, settled the woman’s claim in full and offered compensation in recognition of the delays.
“Sadly, such cases are far from being rare exceptions. The FCA has been publishing various reports and data clearly highlighting industry problems. Last June, it noted that it continues to see ‘substandard service levels across insurance sectors,” said Which?
“And in its latest analysis of home and travel insurers’ claims-handling this July, it concluded there were ‘too many examples of customers not receiving the service they’re entitled to’ – including high rates of claims for storm damage being rejected, inappropriate use of cash settlements that risk leaving customers out of pocket, and lack of adequate oversight or control from insurers,” it added.
However, Which? said the FCA hasn’t set out clear plans to tackle these issues, prompting its super-complaint.
A consumer body can make a super-complaint on behalf of large numbers of customers, where it believes their interests are being significantly harmed by market practices.
The last super-complaint launched by Which?, over banks’ treatment of authorised push payment fraud victims, in 2016, resulted in legislation to protect bank transfer fraud victims by introducing a mandatory system of reimbursement.
In its super-complaint against the insurance industry, it is calling on the FCA to force home and travel insurers to comply with their legal obligations, taking enforcement action where necessary, and to carry out a market study to find out what’s driving poor outcomes for customers.
It is also proposing the FCA works with the Government to review consumer protections and how they are working in practice.
The FCA has 90 days to respond.
It could decide to take a number of actions as a result – including taking enforcement action against insurers, agreeing voluntary changes with the industry, conducting further investigations of its own, or recommending action by another body – such as another regulator or the Government.
It could also decide that the complaint is unfounded or conclude that it requires no action.
A spokesperson for the Association of British Insurers said: “Insurers take their responsibility to protect their customers incredibly seriously. As a crucial financial safety net, our members work hard to ensure their customers know the details of their policy cover and handle claims as quickly and efficiently as possible.
“Last year, travel insurers also paid out £472 million across more than 500,000 claims.
“We’re working closely with the regulator to ensure good outcomes for customers and will engage with Which? to understand the details of its concerns.”
