Insurance premiums rising and more claims being rejected, FCA says
Drivers and homeowners are hammered by higher insurance premiums — and more claims are being rejected, financial watchdog warns
- Financial watchdog finds that customers are withdrawing claims due to long waiting times
- Denied claims are up 57% for homes and 24% for motor vehicles
Insurance premiums are rising, affecting consumers already struggling with the cost of living, the Financial Conduct Authority has found.
The FCA assessed 11 home and auto insurance companies and found that premiums were rising and more claims were being rejected.
It also noted a slight increase in the number of consumers waiving claims, possibly due to longer wait times.
Customers who are female, younger, unemployed, in the gig economy, renters or from an ethnic minority group were most affected by rising premiums.
The news comes amid allegations of insurance companies making profits as motor and home insurance premiums rise.
Premiums are rising: The cost of car insurance has increased by 16% in a year
The FCA found that these groups are more likely to have low financial resilience and therefore premium increases may have a disproportionate impact on them.
The assessment measures a four-month period from August 2022 to November 2022.
Auto insurance premiums are up 16 percent in a year as insurers say they must pass on rising repair costs.
For example, auto repairers’ energy bills have risen by 300 percent and the cost of paint and parts have risen by 16 percent.
The FCA says the premium increase is also linked to the fact that many UK motor and home insurers are expected to experience losses in 2022 and 2023.
The rise in customers waiving claims is minimal, but the FCA said it was watching the upward trend.
A spokesperson for the FCA said: ‘As with any issue, we will be looking at how people are interacting with their financial services provider.
“It’s an indicator of how people are being treated during the claims process, so it’s a way of checking that people are getting the service they’re paying for. Waiving a claim is a sign that the process may be too difficult.’
Denied: More insurance claims are being rejected, according to the FCA
| Category | engine | At home |
|---|---|---|
| 2021 | 1,710 | 12,566 |
| Aug 22 | 1,780 | 10,499 |
| September 22 | 1,851 | 11,186 |
| Oct 22 | 2.105 | 12,572 |
| November 22 | 2,287 | 16,099 |
| Source: the FCA | ||
It also turned out that consumers are not satisfied with the way their claims are handled.
The time it takes to review claims varies significantly, and the FCA has found examples where the time it took to resolve a claim was significant.
The number of complaints about claims handling and the number of rejected claims is also increasing.
Rejected insurance claims are on the rise
The number of rejected claims is increasing for both home insurance (57 percent more) and motor insurance (24 percent more).
Companies said this was largely due to customers making claims for things they aren’t covered for, which counts as a rejected claim.
An example of this would be claiming accidental damage when they had not purchased comprehensive coverage.
Some companies suggested that the solution to this was to better educate customers about their options at the point of sale.
Companies have a duty to understand a customer’s requirements and needs and only offer products that are in line with them.
The number of complaints about the claim process is also increasing.
Seasonal issues such as flooding or extreme cold caused claims to be handled more slowly or claims not to be covered by the policy, the FCA said.
Rising claims costs, supply chain issues and general communication issues, such as long call waiting times, have contributed to the rise in claims.
One of the most common causes of complaints with auto insurance companies was claims handling numbers.
Some consumers whose cars were written off after an accident claimed they were paid a price less than the fair market value of the vehicle, which is not allowed under FCA rules.
The FCA said it was taking action against the companies that may have broken the rules.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said: “Timely and fair claims handling is especially vital during the cost of living crunch.
‘While we have seen many companies treat their customers correctly, we found too many examples of customers not receiving the service they were entitled to.
“Where we found problems, we told companies to put them right. We’re watching them to make sure they do.’