FCA to expand work to improve standards in home and travel insurance markets

City The regulator has said it is expanding “significant” work planned to improve standards in the home and travel insurance markets, following a super-complaint from a consumer group.

The Financial Conduct Authority (FCA) said that, over the next year, it would do more to improve the management of claims by reviewing firms’ customer service and delivery, and by overseeing third parties that handle claims.

It also aims to improve people’s understanding of what their insurance covers by analyzing the different ways companies sell products.

The regulator said it would use the findings of its reviews to continue working with firms, trade bodies and consumer groups to ensure people get the right information at the point of sale to make informed decisions.

In response to a super-complaint by Whoextent FCA Said: “Our research shows that, in 2024, the majority of consumers who made a home or travel claim were satisfied with the outcome.

“However, our data, including complaint numbers and claim acceptance rates, shows that companies must do more to meet the standards set out in our consumer charge.

“Compared with other insurance products, claim acceptance rates in home and travel remain consistently low, which partly reflects low levels of consumer understanding.”

It added: “We will measure the impact of our actions. If we do not see improvements in claims outcomes, we will hold the industry accountable.”

The regulator said it uses the best tools at its disposal to deliver the quickest results to consumers – and this is not always through enforcement or market studies, which inevitably take time.

Since its review of home and travel insurers in July, the FCA said it had opened two enforcement cases and barred one firm from doing business until it fixed the issues identified.

It has also launched three independent reviews into the firms’ systems and controls and agreed to let senior managers fix the problems and consider whether remediation is appropriate.

Graeme Reynolds, the FCA’s competition director and interim director of insurance, said: “We welcome the addition highlighting the issues we have identified in home and travel insurance.”

“We have set out more details on the action we have already taken to fix the problems, and we are expanding our existing action plan to improve the claims process and consumer understanding of what they are covered under.

“We will monitor consumer outcomes and continue to hold companies and their senior leaders accountable for making improvements to help build trust and ensure people get fair priced insurance.”

A super-complaint is a complaint submitted by a consumer body on behalf of a large number of customers where it believes that their interests are being significantly harmed by market practices.

Only certain organizations have legal powers to make super-complaints, such as consumer bodies.

Which one? Made a super-complaint to the regulator in September over its concerns about “serious failings” in the home and travel insurance markets.

Consumer champions said these two types of insurance have the lowest claims acceptance rates, and the impact on the consumer when something goes wrong can be significant.

Which one? She said some of the stories she has heard from consumers about their experiences have been “heartbreaking.”

Super-complaints relate to markets as a whole, not specific firms.

Which one? Super-Complaint focuses on three main concerns – handling bad claims; unfair sales practices; And consumer groups claim there is a lack of implementation and enforcement of FCA rules and other relevant legislation.

Which one? It previously said it had heard from hundreds of people “who have been left to suffer at the hands of their insurers”.

It says home and travel insurance products are widely held by UK consumers, and are extremely important to society and the economy.

It said that in 2024, 32 million UK adults had contents insurance and 29 million had buildings insurance, while 15 million and 13 million UK adults had annual and single-trip travel insurance respectively.

The FCA said it would find that it is succeeding in addressing concerns through metrics such as fewer claims-related complaints, improvements in satisfaction levels in its Financial Life Survey and other surveys, and companies being able to show steps taken to improve.

Its response said that in 2024, 99% of motor claims were accepted, while 80% of standalone single journey travel claims and 74% of household contents only claims were accepted.

It says low rates on home and travel insurance may indicate poor claims outcomes, but may also indicate low levels of consumer understanding.

Mr Reynolds said that, in terms of addressing the concerns raised: “We have been very clear in our response about how we know we will be successful.

“We have worked out what are the measures that we will focus on. It is important to ensure that we focus on a mix of measures.

“So this includes improvements in claims acceptance rates, it includes fewer complaints in relation to claims, it includes improvements in the claims satisfaction metrics that we see through our Financial Life Survey and other surveys that other consumer bodies do. And it also includes us seeing evidence of increased innovation in the way companies are communicating with their customers.

“So those are the things we will be looking for, we would expect to see there, we will update during 2026 how that is going and if we are not seeing those improvements then we will consider whether we need to take further steps.”

He said the regulator hopes to see change from work with the industry, adding: “We are in a world where technology and AI continue to evolve and that creates many opportunities for customers to communicate in different ways. We think this may lead to a change in customer understanding.”

He added that, with respect to claims management, “again, we are already taking action with those firms, we would expect to see those changes in claims management”.

He added: “It is always the case that where we do not take the right steps, we will use our full regulatory toolkit as necessary.”

Rocio Concha, which one? The director of policy and advocacy said: “Whose? super-complaint exposed home and travel insurance markets that are not working for consumers – and we are pleased that the FCA has taken our concerns seriously.

“The actions announced today should be the first step toward fundamental reform to ensure these markets work better for consumers.

“The regulator has promised swift action to review and resolve problems with customer service, claims handling and how companies sell products, as well as the terms and conditions of the policy.

“These issues have been allowed to fester for years, so the FCA should now take the opportunity to take stronger action to clamp down on widespread bad behavior and issues with how markets are working.

“Which one? Hopefully the FCA will work closely with insurers, comparison sites and consumer groups, but it is essential that any industry-led solutions are accompanied by firm action by the regulator.

“We will continue to work with the FCA – but will also hold the regulator to account to ensure it acts promptly and that these commitments deliver meaningful change for consumers.”

Hannah Gurga, Director General Association of British Insurers (ABI) said: “The FCA has provided helpful clarity on how home and travel insurers can do even more to support their customers, while acknowledging that most people are satisfied with how their claims are handled.

“Bringing further improvements to the claims-management process and ensuring better customer understanding remains a top priority for us and our members. We look forward to building on the progress already made, strengthening trust in our sector, and working closely with Which?, the FCA and the wider industry to ensure that people get the help they need most.”