How poor insurance sales practices give false confidence to customers

Last November, Which? examined why industry statistics show that home insurers are rejecting more claims than before.

Now, we're calling on the financial regulator to step in and protect consumers, after our latest research revealed 'flawed' sales processes that leave many insurance customers with false confidence in their cover. 

This is especially problematic with home and travel insurance, where claims rejection rates are highest.

Here, we look at some of the false beliefs customers are holding about their products, which can result in problems if they later try to claim. 

We're also unveiling a spoof insurance company, 'Wrippoff Insurance' (see the image above), to highlight the consequences of poor practice in the industry – from confusing sales to nightmare claims.

Customers overestimate their coverage

We recently surveyed 3,538 adults who'd bought car, home, pet or travel insurance, and monitored a group of 24 home and travel insurance customers as they shopped around for insurance products. 

When quizzed about their expectations of insurance policies, respondents were found to often overestimate policies, and also the role of the regulator in maintaining standards of cover. Many were also unaware of typical exclusions in home and travel insurance cover.

For example, 31% believed their policies would cover them for anything that wasn't their fault. This misunderstands how insurance usually works, as virtually all policies itemise a limited set of events that are covered (such as accidental damage) and exclude others (such as wear and tear). 

Meanwhile, 64% of people we surveyed believed most insurance products on the market offer 'similar levels of protection', while 65% thought that the regulator sets minimum levels of cover.

Neither of these beliefs are accurate. As we find every year in our reviews of policies, cover levels and features vary drastically between insurers. Most offer ranges of cover to choose from, as well as various optional add-ons. 

While the industry regulator – the Financial Conduct Authority (FCA) – expects insurance firms to design products with the needs of its customers in mind, it doesn't oversee or dictate minimum levels of cover in policies.  

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Common insurance exclusions

When asked to consider a variety of hypothetical scenarios in which customers might turn to their insurer, large numbers of people had unrealistic expectations about what was typically covered. 

In our survey, 51% thought travel insurance policies would typically cover a connecting flight missed because of a delayed outgoing flight. In reality, it's not uncommon for connecting or returning flights to not be covered.

Meanwhile, 45% of contents insurance policyholders assumed they'd be covered for the theft of contents stolen while they'd been 'away travelling for three months'. In reality, cover tends to be invalidated if the property is left unoccupied for one or two months (depending on the policy), unless the insurer has specifically agreed otherwise. 

Some 39% of customers also thought a typical home insurance policy would cover them against storm damage to a fence, and 34% thought they'd be covered against wet rot in their floorboards. Both are usually excluded. 

• Find out more: how to make a home insurance claim

Who is to blame?

The sales process for insurance has become increasingly speedy and streamlined over the years. Customers have come to lean heavily on price comparison websites and marketing to compare prices and levels of cover in policies, with the finer points of policy wording left unscrutinised.

Similarly, confusing questions asked along the way, such as whether you have a BS3621 standard lock on your door, can flummox customers, leading them to make best guesses. However, information given during the sales process that later turns out to be inaccurate can lead to a claim being rejected.

With nearly three in 10 claims on combined home insurance policies declined in 2023 – and roughly two in 10 travel insurance claimants walking away disappointed – thousands of customers are only discovering crucial shortcomings in their cover when they contact their insurer with a view to claiming.

Customers have a responsibility to take reasonable care when choosing insurance. But insurers and companies distributing insurance (such as comparison websites and brokers) also have a duty to ensure the sales process is clear, with important policy limitations clearly flagged. 

We think firms aren't doing enough to ensure the cover customers are buying is likely to meet their expectations when put to the test.  

• Find out more: making a travel insurance claim

Support our campaign to end the insurance rip-off

Rocio Concha, Which? director of policy and advocacy, says: 'Too many people are having their claims rejected and enduring appalling treatment at the hands of insurance companies. The impact on their finances and on their mental and physical health can be devastating.

'Our latest research shows how many of the problems people face with insurance can be traced back to a flawed sales process, where firms are failing to support customer understanding of complex terms and exclusions, which can sow the seeds for disaster.

'The FCA has the power and responsibility to step in and protect consumers. The regulator must show its teeth and start taking tough enforcement action against insurers that are failing to meet their Consumer Duty obligations, or comply with FCA insurance rules or wider consumer law.'

We're pressuring the regulator to make firms address some of their woeful claims payout rates. As part of this, we've today launched 'Wrippoff Insurance' (see the video below) – an all-too-true parody of the bad experiences many consumers face at the hands of the insurance industry.

• Find out more: Learn about our campaign and support us by signing our petition.