The Financial Conduct Authority (FCA) holds a crucial position in the dynamic insurance industry, ensuring that businesses meet the highest standards of conduct.
Recently, the FCA examined home and motor insurance providers, with a special focus on their treatment of customers in financial difficulties and their claims handling procedures.
The findings of the review, titled “Cost of living: good and poor practice in the general insurance market,” offers valuable insights for all stakeholders in the general insurance market, particularly those providing or distributing motor and buildings/contents policies.
Unveiling the findings
Late last year, the FCA issued a questionnaire to a selection of the largest general insurance firms. The aim was to assess whether these firms were meeting the expectations outlined in the FCA’s Dear CEO letter (published September 2022).
While the review highlighted examples of good practice, it also identified areas where improvement is needed, particularly concerning the treatment of vulnerable customers and claims handling.
Premium increases and financial difficulty
The primary conclusion of the review was the significant effect of rising premiums on consumers already battling the cost-of-living crisis. The FCA indicated that these increases might unduly impact consumers with low financial resilience, such as those out of work, those employed in the gig economy, or those from ethnic minority groups. The FCA will closely watch these measures and how firms assist their customers as the cost of living continues to rise.
Claims handling and vulnerable customers
The review identified issues around claims handling and the identification and recording of potentially vulnerable customers. The time taken to assess claims varied significantly across firms, with some instances of lengthy resolution times. Furthermore, the volume of complaints relating to claims handling and the number of rejected claims is on the rise.
Governance and controls
The FCA found that some firms were not yet able to demonstrate effective governance and controls, particularly in terms of monitoring consumer outcomes. More work is needed to ensure good flows of information between intermediaries and manufacturers, especially with the upcoming implementation of the Consumer Duty regulation.
The path forward: Embracing change
The FCA’s review comes ahead of the implementation of its Consumer Duty regulation at the end of July 2023. This new regulation introduces a standard of fairness and requires firms to review their products and services against this standard. Firms must identify relevant sources of data to assess whether the outcomes their customers are experiencing align with their obligations.
At Davies, we are strong believers in the transformative power of change and the vital function that fairness plays in our industry. We feel that it is our collective responsibility to create a more equitable environment, and we take pride in being part of this necessary journey. With this in mind, we encourage all firms in this sector to use this opportunity to examine their operations and strive for greater outcomes for all their clients – particularly those that are vulnerable.
Ready to elevate your customer experience? Contact the Davies team today and discover how we can support your journey.
