Home and travel insurance super-complaint launched over 'poor claims handling' and other 'serious failings'
"Fundamental changes" are needed to fix the "broken" home and travel insurance markets, consumer group Which? has said after submitting a 'super-complaint' to the financial regulator today (Tuesday 23 September). The move has been welcomed by MoneySavingExpert.com (MSE) founder Martin Lewis. Here's what you need to know.
Which? says its research has found "serious failings" with home and travel insurance, leading to widespread poor customer experiences – from confusion over policy coverage to the substandard treatment of people needing to make a claim.
It added that it was focusing on these markets because they have "some of the lowest levels of claims acceptance rates", while the impact on consumers when things go wrong "can be huge".
Martin Lewis: 'There's an imbalance of power between insurance firms and consumers'
The very nature of insurance makes it hard for consumers to get it right. Policies are there to protect you against yet unknown future events, so even if people were able to wade through the copious terms and conditions, they don't know what risk to check for, as they don’t know what may befall them.
That leaves an imbalance of power between firms and consumers, so it's crucial there's a principle of fair dealing, alongside strong monitoring and proper enforcement by the regulator, so people get the protection they would legitimately expect.
This is evidenced by specific mystery shopping research by the Money and Mental Health Policy Institute charity. Of 15 travel insurers, nine turned down a 'customer' with a past history of severe bipolar disorder, and even when cover was offered the price quoted was six to 27 times higher than for others.
My view is the increased risk for a week away cannot be justified by the huge cost uplift – but pricing is so vague, without investigation it is impossible to know. So I warmly welcome the Which? super-complaint, and hope it makes sure the problems facing consumers are thoroughly investigated and appropriate regulatory measures are put in place.
Why Which? has launched a super-complaint
A super-complaint is a type of legal power some consumer bodies have, which they can use where they believe consumers are suffering significant harm.
The Which? super-complaint, which it has submitted to the regulator the Financial Conduct Authority (FCA), focuses on three main problem areas with home and travel insurance:
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Poor handling of claims.
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Inappropriate sales processes.
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And a lack of application and enforcement of the regulator's existing rules and other relevant law.
The organisation says its super-complaint includes evidence and original research based on surveys of thousands of insurance customers, in-depth interviews with people who have experienced problems, analysis of thousands of Financial Ombudsman Service (FOS) decisions and independent legal analysis.
Rocio Concha, Which? director of policy and advocacy, said: Our evidence that the home and travel insurance markets are not working well is overwhelming and we have heard heart-breaking stories from people who have found the experience of dealing with an insurance company worse than the distressing life events that led to their claim.
It's time for the FCA to get a grip on the home and travel insurance markets and urgently intervene to make sure insurers up their game. This super-complaint should mark a turning point that leads to fundamental changes in how insurance companies treat their customers.
Financial regulator accused of failing to tackle 'persistent problems'
Earlier this year, the FCA conducted a review of claims handling within the home and travel insurance markets, which revealed similar issues to the problems raised by the super-complaint.
Despite this, Which? says it has found "little evidence that the FCA has taken meaningful action" to address the "persistent problems" in these markets, adding that consumers "cannot afford to wait any longer" for action from the regulator.
In an initial response to the complaint, the FCA told MSE it had been focusing on "raising standards" with the insurance sector, including banning the loyalty penalty, securing compensation for underpaid motor claims and investigating value in premium finance (where you pay for insurance in instalments). It added that it would formally respond to Which? in due course – under the law, it has 90 days to do this.
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