Which? urges regulator to take decisive action on 'rip-off' insurance

In a pivotal moment for our campaign to pressure the insurance industry into playing fairer by its millions of customers, we've delivered a petition with 170,000 signatures to the financial regulator. 

The Financial Conduct Authority (FCA) has the power and responsibility to step in and protect consumers by taking tough enforcement action against insurers that are failing to meet their Consumer Duty obligations, or complying with FCA insurance rules or wider consumer law.

Our research suggests that too many insurers are still falling short and letting customers down when they need support the most.

Here, we explain why we're calling on the regulator to use its full powers to crack down on insurers that continue to fall short.

End the Insurance Rip-off 

We launched our campaign, End the Insurance Rip-off, last summer following research that revealed rising levels of stress and inconvenience in complaints to the Financial Ombudsman Service. A subsequent Which? study uncovered widespread evidence of harm in how insurers handle claims.

Separate Which? research has also revealed serious shortcomings in how insurance is sold and explained to customers and potentially unfair exclusions in home insurance policy wording – factors that could be setting customers up for rejection when they try to claim. 

These issues exist against a backdrop of concerningly low claims acceptance rates, especially with home and travel insurance.

The Consumer Duty, which came into force in July 2023, requires financial firms to provide clear communications, offer fair value and deliver the support customers need when it matters most. But our investigations suggest that too many insurers are still falling short.

While the FCA has raised concerns and launched some reviews, we believe the regulator must now go further and act more decisively to make insurance work better for consumers.

• Find out more:making a home insurance claim.

Premium finance fairness

Feeling short-changed at the point of claiming isn't the only area in which we've uncovered issues. 

Since early last year, Which? has run three surveys of insurance firms to learn about their charges for paying monthly. These have revealed annual percentage rates (APRs), which we think are unjustifiably high – and which effectively penalise customers who can't afford to pay for their insurance in one go – potentially to the tune of hundreds of pounds.

Earlier this month, our latest findings were cited in a letter sent to the FCA's chief executive Nikhil Rathi, sent by MP Danny Beales and signed by 77 other MPs, calling for action from the regulator.

The FCA's 'softly-softly' approach isn't enough

The FCA has carried out reviews into how financial firms support vulnerable customers, has flagged concerns about standards of claims service and is currently examining premium finance (the credit arrangements enabling many customers to pay for insurance monthly) and also claims service – with the verdicts from both reviews expected later this year. 

However, we think stronger enforcement action is likely to be required to lead to the changes consumers need.

Rocio Concha (pictured above), Which? director of policy and advocacy, said: 

'From painful claims processes, to unreasonable policy exclusions and unjustifiably high interest rates for people paying monthly - it's obvious the insurance market isn't working and thousands of consumers are demanding action from the regulator.

'The Financial Conduct Authority must send a clear message to firms continuing to fail to meet expectations: enough is enough. Only through tough enforcement action, will we finally end the insurance rip-off.' 

Update: FCA responds to Which?'s petition

On the 28th May, the FCA's Chief Executive Nikhil Rathi responded to Which?'s petition. He said 'We recognise the strength of views expressed by the large number of signatories' and said the FCA welcomes a 'constructive dialogue as we progress our work' - detailing steps the regulator has taken to date ensure consumers get fair value.

These have included the banning of discounts for new customers (at the expense of existing ones) in 2022 and temporarily pausing sales of GAP insurance products last year after concerns that too little of what consumers paid in premiums was going towards paying claims.

Mr Rathi referenced the two upcoming FCA reports - one on premium finance, and another on how well insurers handle claims - and additionally pointed to work being done to examine the impact of high car insurance premiums - which while now falling have risen considerably in the last three years.

• Find out more: Read the FCA's letter in full. 

Sign our petition

We appreciate the FCA's response - but think that what consumers need now is action. The FCA must end the practice of insurers charging extortionate monthly interest rates and stop providers putting customers through hell with poor claims handling.

To help us continue to put pressure on the industry and the regulator, you can learn about our campaign and sign our petition yourself on our campaign page.

This story was originally published on the 14th May - but has been updated on the 30th May to include the FCA's response to our petition.