How do we make sure insurance customers get value for money? - Rocio Concha

It isn’t just Which? raising the alarm, either. The country’s financial regulator, the Financial Conduct Authority (FCA), recently released its General Insurance Value Measures data - in effect a health check on insurers’ behaviour. The results weren’t pretty.

The FCA identified some really poor payout rates for claims across a range of insurance products, especially home and travel, and wrote to firms warning them to ensure good outcomes for customers.

For buildings insurance, the overall claims acceptance rate is just shy of 68 per cent. For single trip travel insurance, the figure is 73 per cent. For context, it is 99 per cent for motor insurance.

Virtually none of us want to make a claim on our insurance. We don’t want our house to suffer structural damage as a result of inclement weather conditions, to have our car involved in an accident or for our overseas trip to be curtailed due to an emergency.

Yet there is compelling evidence to suggest that some insurers are making what is already a stressful experience even worse with their belligerence when it comes to accepting claims.

If a customer’s claim is rejected by their insurer, then the Financial Ombudsman Service (FOS) can provide free mediation between you and the firm. However, the FOS announced just last month that it was dealing with the highest level of complaints relating to motor and buildings insurance that it’s seen in five years.

Between April to June this year, the FOS says it has received 3,869 complaints about car or motorcycle insurance, and 1,776 buildings insurance cases.

By contrast, in the first three months of 2019-20, those figures were 2,626 and 1,275, respectively.

Crucially, the FOS is also now upholding more customer complaints, suggesting that insurers are more likely to get decisions about a claimant’s case wrong.

In reality, that means having a car accident, making a claim to your insurer, getting denied, taking your claim to the FOS and waiting months for the money to which you’re entitled.

It won’t be lost on readers that all of this is happening at a time when premiums are at eye-watering levels. The trade body, the Association of British Insurers, reported recently that the average price paid for motor insurance, for example, has gone up by just over a fifth (or nearly £90 in cash terms) in the past year - the highest level since records began in 2012.

Amid the worst cost of living crisis in decades, customers deserve value for money - especially for insurance that is legally required, like motor cover.

Clearly, this state of affairs cannot continue. I have written in these pages before about the FCA’s new Consumer Duty - a set of higher standards to which insurers (and all firms in the financial services sector) must abide. Firms which fail to meet new standards should expect to face tough action from the regulator.

Better behaviour and treatment of customers should help to drive down the number of customers needing to take their claim to the FOS, but the reality is that insurers have been subject to high regulatory standards for some time now.

Insurers should take heed of warnings from the regulator and deliver their customers a better deal.

Started in 1957, Which? is an independent, non-profit organisation which aims to protect consumers rights.

Rocio Concha Galguera is director of policy and advocacy & chief economist at Which?