The City regulator has said it is expanding the “significant” work it had planned to improve standards in the home and travel insurance markets, following a super-complaint by a consumer group.
The Financial Conduct Authority (FCA) said that, over the next year, it will do more to improve claims handling, by reviewing firms’ customer service and delivery and how they oversee third parties that handle claims.
It is also aiming to improve people’s understanding of what their insurance covers, by analysing the different ways firms are selling products.
The regulator said it will use findings from its reviews to continue working with firms, trade bodies and consumer groups, so people have the right information at the point of sale to make informed decisions.
In its response to the super-complaint by Which?, the FCA said: “Our research shows that, in 2024, most consumers who made a home or travel claim were satisfied with the result.
“However, our data, including complaints numbers and claim acceptance rates, shows firms must do more to meet the standards we set in our Consumer Duty.
“Compared to other insurance products, home and travel have persistently lower claims acceptance rates, partly reflecting lower levels of consumer understanding.”
It added: “We will measure the impact of our actions. If we don’t see improvements in claims outcomes, we will hold the industry to account.”
The regulator said it uses the best tools available to it to deliver the fastest results for consumers – and this is not always through enforcement or market studies, which inevitably take time.
Since a review of home and travel insurers in July, the FCA said it has opened two enforcement cases and stopped one firm from doing business until it fixes issues it identified.
It has also launched three independent reviews into firms’ systems and controls and made senior managers agree to fix problems and consider whether redress is due.
Graeme Reynolds, the FCA’s director of competition and interim director of insurance, said: “We welcome Which? shining a light on issues we identified in home and travel insurance.
“We’ve set out more detail on the action we’ve already taken to fix problems, and we’re expanding our existing work-plan to improve the claims process and consumer understanding of their cover.
“We’ll be monitoring consumer outcomes and will continue to hold firms and their senior leaders to account for making improvements, to help build trust and make sure people get fair value insurance.”
A super-complaint is a complaint submitted by a consumer body on behalf of large numbers of customers, where it believes that their interests are being significantly harmed by practices in a market.
Only certain organisations have legal powers to make super-complaints as consumer bodies.
Which? made a super-complaint to the regulator in September, over its concerns about “serious failings” in the home and travel insurance markets.
The consumer champion said these two types of insurance have some of the lowest levels of claims acceptance rates, and the impact on a consumer when something goes wrong can be significant.
Which? said some of the stories it has heard from consumers about their experiences have been “heartbreaking”.
The super-complaint concerns the markets as a whole, not specific firms.
The Which? super-complaint focuses on three main concerns – poor claims-handling; inappropriate sales processes; and what the consumer group claims is a lack of application and enforcement of FCA rules and other relevant law.
Which? said previously that it has heard from hundreds of people “who have been left to endure ordeals at the hands of their insurers”.
It said that home and travel insurance products are widely held by UK consumers, and hugely important for society and the economy.
In 2024, 32 million UK adults held contents insurance and 29 million held buildings insurance, whilst 15 million and 13 million UK adults held annual and single-trip travel insurance, respectively, it added.
The FCA said it will know it is succeeding in addressing concerns through metrics such as fewer complaints relating to claims, improvements in satisfaction levels in its Financial Lives Survey and other surveys, and firms being able to show the steps they have taken to make improvements.
Its response said that in 2024, 99% of motor claims were accepted, compared with 80% of standalone single trip travel claims and 74% of home content only claims.
The lower rates for home and travel insurance may indicate worse claim outcomes, but also lower levels of consumer understanding, it said.
Mr Reynolds said that, in terms of addressing the concerns raised: “We’ve been very clear in our response about how we know we’ll be succeeding.
“We’ve mapped out what those measures are that we’ll be focusing on. It’s important to ensure that we look at a blend of measures.
“So that includes improvements in claims acceptance rates, it includes fewer complaints in relation to claims, it includes improvements in the claims satisfaction metrics that we see through our Financial Lives survey and other surveys that other consumer bodies do. And it also includes us seeing evidence of increasing innovation in the way that firms are communicating with their customers.
“So those are the things that we’ll be looking for, we’ll expect to see there, we’ll update during the course of 2026 on how that’s going and if we’re not seeing those improvements then we’ll consider whether there’s further steps we need to take.”
He said the regulator expects to see changes from work with industry, adding: “We’re in a world where technology and AI are continuing to evolve and that creates lots of opportunities for customers being communicated with in all sorts of different ways. We think that can lead to step changes in customer understanding.”
He said that, regarding claims handling, “again, we’ve been taking action with those firms already, we’ll expect to see those changes on claims handling”.
He added: “It’s always the case that where we don’t see the right steps taken, we’ll use our full regulatory toolkit as we need to.”
Rocio Concha, Which? director of policy and advocacy, said: “Which?’s super-complaint exposed home and travel insurance markets that aren’t working for consumers – and we are pleased that the FCA has taken our concerns seriously.
“The actions announced today must be the first step towards fundamental reform to ensure these markets work better for consumers.
“The regulator has pledged swift action to review and address problems with customer service, claims handling and how firms sell products, as well as on policy terms and conditions.
“These issues have been allowed to fester for years, so the FCA must now seize the opportunity to take strong action to stamp out widespread bad practice and issues with how the markets are working.
“Which? expects the FCA to work closely with insurers, comparison sites and consumer groups, but it is essential that any industry-led solutions are accompanied by firm action by the regulator.
“We will continue to work with the FCA – but also hold the regulator to account to ensure it acts with urgency and that these commitments lead to meaningful change for consumers.”
Hannah Gurga, director general of the Association of British Insurers (ABI), said: “The FCA has provided helpful clarity on how home and travel insurers can do even more to support their customers, while recognising that most people are satisfied with how their claim is handled.
“Driving more improvements in the claims-handling process and ensuring better customer understanding remains a top priority for us and our members. We look forward to working closely with Which?, the FCA and wider industry to build on the progress already made, strengthen trust in our sector, and ensure people get the help they need when it matters most.”
Why getting a mortgage is about to become easier
Millions with cash savings to get recommendations from banks on investing
Targeted support could see 18 million savers offered help in next decade
New deal needed for ‘bewildered and frightened’ farming sector, review urges
200th banking hub opens with chocolate coins marking the event
Interest rates live updates: Bank of England set to deliver boost for mortgages
