The FCA’s recent publication “Roadmap for Retail Insurance – Empowering Consumers and Strengthening Markets” is the result of a market wide review of how the industry is performing, with a particular focus on consumer service and outcomes.
The report has been described as a “call to action” to rebuild trust with consumers in the retail market, and to improve perceived inefficiencies in an industry still recovering from the after effects of the Covid-19 pandemic. The report is the culmination of a close-eye investigation into current practices in the motor, home and travel insurance sectors, but it is fair to say that the FCA’s findings will impact insurers generally, plus their partners and intermediaries. Whether the recommendations and action points made will lead (as is hoped) to a more resilient and consumer-centric industry, with an increased focus on fair outcomes, will become clear in the months and years ahead.
The review was called for given that consumer disquiet over the rising cost of insurance has been an issue for some time, as well as the quality of the customer journey in the claims space. The FCA report includes recommendations for the streamlining of the claims process, intended to reduce reliance on outsourcing to third party suppliers, with accident management and credit hire companies singled out. Organisations of this type are presented as one of the elements responsible for driving up insurer spend. It is hoped that a more “in-house” approach will go some way to ameliorate the unprecedented levels of claims inflation triggered by the pandemic. The FCA also presses for greater clarity with policy wording, to avoid disputes over ambiguity (woolly definitions of “storm” or “wear and tear” are given, for example) and to improve claims acceptance.
The quality and consistency of claims handling, which often delay resolution, is also underlined as a shortcoming with some insurers, with improved communication, supervision and a more proactive approach advocated for. More appropriate handling of vulnerable policyholders is flagged as a requirement. This is with particular emphasis in home claims, with vulnerable individuals sometimes paid off without due consideration given to whether provision of services are more appropriate. Premium finance is highlighted, with the FCA reviewing how consumers meet premium payments with reliance on credit, and what is termed “recourse arrangements” where finance providers offset their bad-debt losses by passing these on to insurers. This is seen as another cause for the inflation of the general cost of insurance, and the ability for some actors in the finance space to make disproportionately large returns at reduced risk and to the consumers’ detriment.
The report is one further step in the FCA’s Consumer Duty initiative, which require insurers to provide fair value in exchange for premiums, and that policy coverage meets consumers’ needs. In terms of policy, the consumer journey and value for money, has long been priorities for insurers, but this report indicates that there is still work to be done. Our view is that, as a message, the report cannot be ignored. Further, for the more entrepreneurial insurers willing to simplify and streamline the claims process, there are real opportunities for positive market leading change.
This article was first published in the ABI Legal newsletter
For further information on this subject, please contact Charles Heppenstall
