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Member update FCA thematic review on household and travel insurance claims handling

Following the announcement of its initial findings on April 9, 2014 the FCA today published the full report of its thematic review of insurers’ management of household and retail travel claims.

This thematic work was designed to assess the extent to which insurers put consumers making claims at the heart of their businesses.

Overall, 64% of claimants surveyed were ‘satisfied’ or ‘very satisfied’ with how their claim was handled, rising to 82% among policyholders who were successful in making a claim. The FCA found virtually no evidence of insurers trying to push down aggregate claims costs by not settling valid claims, or systematically trying to squeeze the settlement cost. There was no evidence of insurers deliberately delaying settlement, though there were examples of poor management of the claim causing some delays.

The report identifies seven areas for improvement to further increase customer satisfaction levels. The FCA expects insurers to reflect on the detailed findings in the report and consider how they can respond within their own businesses and, where appropriate, collectively as a sector.

Areas for improvement:

  • Recording and use of inbound claims calls (mainly household)
  • Communication and ownership throughout the claim
  • Management of supply chains (household)
  • The emergency assistance activities of travel insurers and the need for the right insurance
  • Insurance in relation to medical conditions (travel)
  • Consumer outcomes in long chains of delegation
  • The clarity of product documentation

Household Insurance

There was greater evidence of innovation in claims handling for household insurance compared to travel. Recognition that this is a more profitable product.

Lack of consistency in how in-bound calls which do not result in a claim are categorised by insurers. Information recorded on CUE may also vary between insurers.

Consumer research showed that the most common reason policyholders withdrew, or did not pursue, a household claim was because of concern about the potential impact of a claim on their renewal premium. Insurers should be mindful of potentially deterring claimants through the provision of too little, too much or the wrong sort of information.

The report acknowledges that events such as fire or flooding, which can cause major damage to a person’s home, have a major emotional impact. The FCA discussed extreme weather surge events with insurers and acknowledged that firms had contingency plans which involved redeploying staff and using third party loss adjustors to provide overflow capacity. Insurers’ response to surge events was not reviewed in any detail.

Travel Insurance

Emergency assistance was the main area from the review where claimants are at the heart of what insurers do.

Even with full engagement in the purchasing process, there are still potential barriers to consumers understanding exactly what claims arising from medical conditions will be covered. 88% of those surveyed knew they had to disclose their own medical conditions, 82% those of their travelling companions, and 74% in relation to others on whom the trips depend. However, senior claims managers said that disclosure of medical conditions is a significant problem, echoed by the travel industry.

Firms that co-located emergency assistance operations and claims handlers on the same site were the most effective. In these cases, the medical expertise required to handle assistance claims is readily available for consultation on cancellation claims.

Following discussions with the FCA at the last two Travel Committee meetings, we have yet to agree the scope for any potential cross-industry working group on pre-existing medical conditions: “The key travel insurance stakeholders have agreed to work with us collectively to see what can be done to achieve greater understanding by consumers and greater clarity for them. One of the key actions for us following the conclusion of this thematic project will be to agree the organisational arrangements for taking this work forward.” We continue to engage with the FCA on this matter.

Next Steps

The FCA will undertake thematic work later this year to consider whether the expectations of commercial customers, particularly smaller businesses, are met in the claims process, where poor behaviours could lead to poor customer outcomes and have a wider impact on trust in the market.

We understand that this is due to launch in June and is likely to focus on Employers’ and Public Liability claims and Commercial Property damage.

The full report on household and retail travel claims is available on the FCA website.

Last updated 01/07/2016