Which? has launched a campaign and called on the Financial Conduct Authority (FCA) to take tough action against insurance firms that fall short of the regulator’s required standards.
Which?’s analysis of the claims handling process found that 48% of all people making a claim about home, travel, motor and pet insurance experienced at least one problem in their claim journey.
These problems included having to repeatedly chase insurers for information on their case, and insurers not identifying and responding appropriately when people were struggling as a result of the incident that led to their claim.
Where insurers brought in third-parties to deal with claims, these problems were particularly acute.
Some customers felt harassed for difficult to obtain information about seriously ill or deceased family members, before being told the records were not necessary after all, while one woman developed asthma when she was forced to live in a mould-ridden home while her claim process continued for months.
The research also found that insurers were failing in their duties to their most vulnerable customers.
Claimants surveyed that had been severely impacted by the event they were claiming for were far more likely to report problems in the claims process than those who had not – 63% versus 33%.
These claimants were also three times more likely (30%) to rate their provider as poor at considering and accounting for any challenges they were facing at the time of making the claim than those who were not severely impacted (9%).
The research also found that insurers’ behaviour had a direct impact on customers’ physical and mental health.
Nearly a third (31%) said insurers’ actions negatively impacted their stress levels, while one in 10 had sleep issues and another one in 10 said the claims process affected their physical health.
The FCA made it clear that insurers should have already been meeting many parts of the Consumer Duty based on existing requirements, and that it was a less significant change than for other parts of the financial services sector.
The regulator planned to review how the insurance sector handled claims, as well as how all financial services firms treat customers in vulnerable circumstances.
Which? said these reviews would mark a big test of the Consumer Duty, given its findings that firms are failing to consistently meet the requirements for customers in vulnerable circumstances.
Rocio Concha, director of policy and advocacy at Which?, said: “This research paints a shocking picture of insurers’ failure to handle customers’ claims in a timely, empathetic way – and it’s particularly concerning to see how people in vulnerable circumstances due to the event that led to their claim are being failed by their insurers.
“At a time when many consumers face soaring premiums, it’s clear they’re being ripped off – either by abysmal claims handling that doesn’t match up to the price they’re paying, or by unjustifiably high premiums, especially for those who can’t afford to pay for a year’s cover in one go.
“Today, we say enough is enough. The rules for insurers are clear, but the insurance rip-off will not end unless the regulator takes meaningful action against firms that consistently fall short.”
Andrew Gething, managing director of MorganAsh, said: “The Which? report is a depressing read and highlights a recurring theme where vulnerable customers regularly experience outcomes that are worse than the resilient.
“With Consumer Duty now in place and customer vulnerability guidelines well established before then, poor outcomes such as these should be minimal.
“A systematic problem for financial services firms is a lack of investment in systems and processes to identify and monitor customer vulnerability.
“Without this critical step, firms do not have the necessary data to meet the needs of those most susceptible to harm or to ensure such poor outcomes are minimised.
“Technology is proving to help firms mitigate this onerous task, all while delivering a far better and bespoke service to clients and importantly, meet the requirements of Consumer Duty and the regulator.”
