The UK consumer news and reviews business, Which?, have demanded the FCA take a harder stance on insurance businesses that fall foul of regulator’s standards.
Which? have stated that almost half 48% of all individuals experience an issue when making a claim. This has caused significant harm, and insurance businesses need to be held to account.
The most common problems experienced are:
- Having to repeatedly chase insurers
- Insurers not responding appropriately
- Third parties brought in by insurers being incompetent.
Which? also provided insight into the impact upon customers classed as most vulnerable. These include elderly or disabled customers. Their research found that vulnerable customers were three times more likely to rate their provider as poor, inconsiderate and unaccommodating.
Insurers behaviours has also been shown to have impacted the health and welfare of customers. 31% said their stress levels were negatively impacted, 10% had sleep issues, 10% said the claims process affected their physical health.
Which? provided examples of poor claims processes and insurer behaviour. One included a widow who had been burgled and was asked inappropriate question. Another was of an individual who had a respiratory infection caused by mould particles from a claim which should have been sorted sooner.
In light of their research, Which? has called for the FCA to take meaningful action firms and carry out punishments. This has become part of Which?’s campaign, End the Insurance Rip-Off.
How does the FCA regulate insurers?
The financial regulatory body the FCA works to regulate the conducts of insurers and insurance businesses. Nearly 45,000 businesses are regulated by the FCA.
The FCAs Consumer Duty practice came into force in July 2023. Under the duty, firms must act to deliver good outcomes for customers. Much of the guidance from the FCA predates the Consumer Duty agreement, hence the FCA have stated that insurers should already be meeting the requirements of the duty.
Insurers who consistently fail in their responsibilities and let down their customer will face penalties set out by the FCA. These sanctions, outlined in the FCA Handbook, include:
- Publishing a statement against a person or issuer
- Imposing a financial penalty on a person or sponsor
- Imposing a limitation or restriction
- Imposing a suspension
- Imposing a disciplinary prohibition on an individual.
What Actions and Good Practice does the FCA’s consumer duty expect to see?
Outlined in their Consumer Duty guidance information, the FCA list a range of actions firms have taken or should take to pursue financial objectives while avoiding foreseeable harm:
- Define the target market as to not miss-sell to the wrong customers.
- Redefine data monitoring capabilities
- Adapt products to deliver additional benefits
- Make products available more widely
- Simplify their product off
- Consider the needs of customers with vulnerability characters
- Review systems processes and approaches in relation to vulnerable customers
- Use customer data to identify vulnerable customers, and improve the way data is capture to identify vulnerabilities
- Turn off productivity targets for staff if a customer is identified as vulnerable
What Actions and Poor Practices have the FCA witnessed which need improvement?
Outlined in their Consumer Duty guidance information, the FCA list a range of areas for improvements, having witnessed poor practice and lacklustre processes:
- Not paying close enough attention to customer needs.
- Insurers failing to grasp their role and what that means for their responsibilities.
- Waiting to see if the FCA intervene rather than proactively addressing an issue.
- Failing to track vulnerable customers.
- Not prioritising the identification of vulnerable customers in portfolios.
- Automatically assessing all customers over a certain age as vulnerable – rather than requesting evidence.
- Repeatedly asking consumers to disclose their needs.
Ultimately, the publication reminds firms of required outcomes and sets out a standard of good practice. Implementation plans and Fair value frameworks are included. This is to help firms continually improve and identify firms that are delivering poor customer outcomes.
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