how insurers add to your claims mess

Dear Rocio,

My insurance company is absolving me of how they handle my claim. What can be done to improve things?

Name and address provided

Rocio says: Auto and home insurance have been described as “grudge purchases” because they’re usually not optional. You must be insured to legally drive on the road. Most mortgage providers insist on building insurance as a prerequisite to a loan. So when customers feel cheated with these policies, the consequences are not trivial.

Which? The investigations revealed several problems in both markets, from unfair pricing practices to poor claims management.

Let’s start with pricing – a key consideration for consumers still struggling with the high cost of living. Figures from industry body the Association of British Insurers show that car insurance premiums rose by 25% on average from 2022 to 2023. The latest premium tracker found that prices in the second quarter of this year were a fifth more expensive than in the same period a year before.

The price of premiums is compounded by the added cost drivers and homeowners face paying monthly for coverage. Often these customers don’t do this out of choice, but out of financial necessity – because they can’t afford to come up with the cash to pay all at once annually.

Many firms continue to charge pay-monthly customers attractive interest rates on their repayments. We have found some providers who charge rates comparable to some of the more expensive credit card lenders, despite the risk to the insurer being lower as non-payments can lead to policy termination. The result is that these less financially resilient customers can end up paying hundreds of pounds more over the course of a year.

When it comes to handling complaints, the picture is just as worrying. Our in-depth analysis found that nearly half of home, auto, travel and pet insurance customers encountered at least one problem when you make a request. These issues ranged from repeatedly chasing insurers for information to not being told why their claim was only partially accepted or rejected outright. When third-party firms became involved, the situation often became much more complex.

Which? found that customers who were put in a vulnerable position by the event that led to their claim—a car accident or house fire, for example—were twice as likely to report a problem.

It’s a worrying picture, but we’re finally seeing signs of progress. A government-led task force has been set up to tackle the rising cost of car insurance and will bring together government departments, industry bodies and consumer groups such as Which? to its advisory panel to learn how the market can work more fairly for customers.

Further progress came last week when the Financial Conduct Authority launched a market study into the issue of high interest rates for consumers paying monthly in both the car and home insurance markets. This is the third major review of everyday insurance it has launched recently – which tells its own story about the extent of the problems in the insurance market.

All insurers are now bound FCA consumer obligation requirements, including ensuring that customers get the support they need, when they need it, and ensuring that they provide fair value. But it is not clear that it meets these requirements.

Which? has concerns about how clearly firms present information about their policies and how initial quotes represent fair value if customers are able to haggle insurers after relatively short phone calls — sometimes by significant amounts.

It is positive that The FCA is investigating some of the issues Which? he pointed out with reassurance – but it won’t be the first time the regulator has set out to tackle problems in this market – and meaningful action hasn’t always followed quickly. The FCA first raised concerns about GAP insurance products 10 years ago, for example, but took significant steps to address poor value this year.

Which? will continue to hold insurers to the fire and urge regulators to be vigilant until action is taken to end insurance fraud and make the market work more fairly for consumers.

Rocio Concha is Which? director of policy and advocacy. For your question to appear on this page,
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