Dear Rocio,
My insurance company is driving me spare by the dismal way it is dealing with my claim. What can be done to improve matters?
Name and address supplied
Rocio says: Motor and home insurance have been described as ‘grudge purchases’ because they usually aren’t optional. You need to be insured to drive on the road legally. Most mortgage providers insist on buildings insurance as a precondition of a loan. So when customers feel ripped off with these policies, the consequences aren’t trivial.
Which? research has exposed several issues in both of these markets, from unfair pricing practices to poor claims-handling.
Let’s start with pricing – a key consideration for consumers still battling the high cost of living. Figures from industry body Association of British Insurers show that car insurance premiums have risen by 25 per cent on average from 2022 to 2023. Their latest premium tracker found that prices in the second quarter of this year were a fifth more expensive than the same period the year before.
The price of premiums is compounded by the extra cost faced by motorists and homeowners who pay for cover monthly. Often these customers do so not out of choice, but financial necessity – because they can’t afford to stump up the money to pay all in one go annually.
Many firms continue to charge pay-monthly customers eye-watering levels of interest on their repayments. We’ve found some providers charging rates comparable to some of the pricier credit card lenders, despite the risk to the insurer being lower because non-payments can lead to the termination of the policy. 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 claims handling, the picture is similarly concerning. Our in-depth analysis found that almost half of home, motor, travel and pet insurance customers experienced at least one problem when making a claim. These problems 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 got involved, the situation often became much more complex.
Which? found customers who were put in a vulnerable position by the event that led to their claim – a car crash or house fire, for example – were twice as likely to report an issue.
It’s a worrying picture, but we are finally seeing signs of progress being made. A government-led taskforce to tackle the soaring cost of motor insurance has been established and will bring together government departments, industry bodies and consumer groups like Which? on its advisory panel to work out 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 for consumers paying monthly in both the car and home insurance markets. That’s the third major review into everyday insurance it has launched recently – which tells its own story about the scale of problems in the insurance market.
All insurers are now bound to the FCA’s Consumer Duty requirements, including making sure customers get the support they need, when they need it and ensuring they offer fair value. But it’s not clear that they are following those requirements.
Which? has concerns over how clearly firms are presenting information about their policies and how initial quotes represent fair value if customers are able to haggle insurers down after relatively short phone calls – sometimes by significant sums.
It’s positive that the FCA is investigating some of the problems Which? has highlighted with insurance – but it won’t be the first time the regulator has set out to tackle issues 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 only took meaningful action to address poor value this year.
Which? will continue to hold insurers’ feet to the fire and urge the regulator to be vigilant until action is taken to end the insurance rip-off and make the market work more fairly for consumers.
Rocio Concha is Which? director of policy and advocacy. To have your question featured on this page,
email business@inews.co.uk
