Almost half of claimants identified at least one problem with how their claim was handled, indicating widespread industry failures to deliver the service levels required by the regulator, the Financial Conduct Authority (FCA).
The report found:
Where insurers have been letting claimants down
The new research flagged insurers' consistent failures to explain to claimants what they could expect and how long the process would take, and highlighted inefficiencies in how evidence is collected to validate claims.
For example, 26% of claimants said they didn't feel clearer or more certain of their situation after they contacted their insurer. And 21% said they had to repeat information or repeatedly share documentation and evidence during the claims process. Others reported difficulties submitting evidence - eg navigating the insurer's online claims portal.
Later in the process, customers complained about how well their insurers communicated with them. One in five said they had to chase their insurer for information on a claim's progress. A quarter of people whose claims were rejected said they didn't fully understand why - indicating that insurers failed to explain their claims decisions.
'Axa's process made me feel incompetent'
As well as carrying out a survey, Which? also commissioned in-depth interviews of 24 claimants to understand what issues arose and what 'good' and 'bad' processes looked like.
One interviewee, Louise, said she made a travel insurance claim last year over a cancelled family holiday to Spain after her father-in-law had a stroke. Louise had contacted her insurer Axa Partners and was asked to upload relevant claim documents to the online portal. But after doing so, she was repeatedly asked to upload the documents again, despite receiving email notifications to say they had been received.
This process lasted several weeks, with Louise sending the same documents over and over, including a medical form for her father-in-law. Louise phoned the Axa Partners customer service team on numerous occasions and estimates that she spoke to around 10 different advisers throughout the claim process.
Louise said: 'I felt incompetent due to Axa's incompetence. I have dyslexia and kept questioning myself. I checked that I had sent all the documents. It felt as though they had everything but didn't want to pay out. The majority of the call centre staff I spoke to did not seem interested. I probably would have caved and given up if I didn't have a travel industry background. I also had the support of my family. I wouldn't have coped otherwise. The customer service was shocking. I will never use Axa again.'
Axa Partners said: 'We are sorry for the issues Louise experienced during the processing of her claim. We acknowledge that on this occasion, the service we provided did not meet the high standards we aim to achieve at Axa Partners, and we have provided compensation in recognition of this. The claim has now been settled in full, and we have confirmed this with Louise.
'We endeavour to conclude all travel claims as swiftly as possible, although there can, on occasions, be delays due to the complex nature of some claims. It is crucial we obtain all the relevant information from our customers to enable us to provide considered and accurate claims management that ultimately drives fair outcomes for our customers.
'We deal with over 200,000 travel claims a year, and unfortunately, a small percentage of these do result in a complaint; our ambition is to learn from any complaint and improve the customer experience.'
Find out more:What could be behind the poor service?
One factor that appears to be aggravating poor service is the use of third parties by insurers to help deal with claims. Insurers often use third-party companies and contractors to help assess and resolve claims - such as claims handling firms. This can add extra layers of complexity and confusion to the process, sometimes leaving customers doing some of the legwork.
Claims involving third parties were nearly twice as likely to have problems arise (60%) than those without (34%).
'I'm an asthma sufferer now, which I wasn't before'
Another interviewee, Diane (not her real name), had claimed with her contents and buildings insurers Hiscox and Ark after a room in her home was made uninhabitable due to water damage from a leak.
The claims process quickly became protracted and repetitive as she was asked to deal with a separate claims handling company - and the representative it promised to send to assess her home didn't show up.
Not only did delays cause Diane and her family stress, but worsening mould in her home triggered a respiratory infection and asthma. When a claims professional finally inspected her home, they were shocked at the conditions and took immediate remedial action to prevent further harm.
Diane said: 'I spent Christmas with a hole in the ceiling and had to cancel social arrangements. At the time, prices had hiked up for fuel and I was dealing with a draughty home. If the insurer had come out immediately, the claim would have been for far less money. Instead, the process went on for around six months. I feel disgusted. I'm an asthma sufferer now, which I wasn't before.'
When we contacted Diane's insurers, Ark Insurance (responsible for the part of the claim relating to the buildings damage), declined to comment.
Hiscox, her contents insurer, said: 'Providing our customers with a straightforward and stress-free claims experience is really important to us, and we continue to invest in people and processes with customers at their core.'
Find out more:How are insurers treating vulnerable customers?
Under FCA rules, 'vulnerable customers' are those who, due to their personal circumstances, are especially susceptible to harm - particularly when a firm is not acting with appropriate levels of care.
These can include customers in poor health, those who have been through a recent negative life event, who have limited capability in some areas - such as lacking confidence using the internet - or have reduced resilience to withstanding financial shocks (for example, if they're struggling financially).
The FCA enacted the Consumer Duty nearly a year ago, in July 2023. Under the Duty, financial services firms must prioritise 'good outcomes' for their customers in the design, pricing and delivery of their products. The Duty also requires that customers in vulnerable circumstances should experience outcomes as good as those for other consumers.
Unfortunately, our research found that, generally speaking, this doesn't seem to reflect reality. Customers in our survey who had been severely impacted by the event they were claiming for were far more likely to report problems in the claims process than those who had not - 63% vs 33%.
They were also three times more likely to rate providers as poor at considering and accounting for challenges they were facing at the time of making the claim than those who had not been severely impacted (30% vs 9%).
Find out more:The consequences of poor claims service
Far from being a simple matter of inconvenience, lagging or confusing claims service can make life substantially more difficult for those already contending with a stressful situation.
Some 28% of those in our survey reported that insurers' poor claims handling had a knock-on effect on their ability to do other things. And 31% said insurers' actions made them feel more stressed.
Meanwhile, one in 10 had sleep issues, while another one in 10 said the claims process affected their physical health.
What the FCA is doing
Last month, the FCA released a scathing report criticising insurers for failing to sufficiently track how many of their customers received good or poor service and proactively make changes where problems were spotted. It commented that 'we continue to see substandard service levels across insurance sectors'.
This follows a string of critiques from the regulator on how well insurers are meeting their obligations under the Consumer Duty and the level of value they provide to their customers.
The regulator plans to review how the insurance sector handles claims as well as how all financial services firms treat vulnerable customers.
'An issue of continuing importance for our sector'
The insurance industry's trade body, the Association of British Insurers, gave the following statement in response to Which?'s latest report:
'Our members know that having to make a claim usually means an individual has already experienced incredibly stressful circumstances, and they want to make the process as easy as possible. It’s always concerning to hear when that isn’t the case and they will try to deal with complaints efficiently and fairly.
'When complaints are passed to the FOS (Financial Ombudsman Service), we and our members will work with the ombudsman to understand any opportunities to learn from them and improve processes.
'Identifying whether a customer may be in vulnerable circumstances is an issue of continuing importance for our sector. We’ve set out guidance on the steps firms can take to deliver the most suitable customer service and cater to individual needs, which includes reviewing training needs for frontline staff regularly.
'We recognise however that there is still more to be done and we welcome any opportunities to work with regulators, external experts and charities, as well as our members, to understand what further support can be provided.'
Support our campaign to End the Insurance Rip-Off
Rocio Concha, Which? Director of Policy and Advocacy, said: 'This research paints a shocking picture of insurers’ failure to handle customers’ claims in a timely, empathetic way - and it’s particularly concerning to see how people in vulnerable circumstances due to the event that led to their claim are being failed by their insurers.
'At a time when many consumers face soaring premiums, it’s clear they’re being ripped off - either by abysmal claims handling that doesn’t match up to the price they’re paying, or by unjustifiably high premiums, especially for those who can’t afford to pay for a year’s cover in one go.
'Today, we say enough is enough. The rules for insurers are clear, but the insurance rip-off will not end unless the regulator takes meaningful action against firms that consistently fall short.'
Find out more:Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative (FRN 610689) of the following:
1. Inspop.com Ltd for the introduction of non-investment motor, home, travel and pet insurance, who are authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd.
2. LifeSearch Partners Limited (FRN656479), for the introduction of Pure Protection Contracts and Private Health Insurance, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts and Private Health Insurance Contracts. LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386.
3. HUB Financial Solutions, for the introduction of equity release advice, who are authorised and regulated by the Financial Conduct Authority (‘FCA’) to provide advice and guidance on financial products for those who have retired or are approaching retirement (FCA Firm Reference Number: 455713). HUB Financial Solutions is registered in England and Wales to Enterprise House, Bancroft Road, Reigate, Surrey RH12 7RP, company number 05125701.
4. Alan Boswell Insurance Brokers Ltd (FRN 301), for the introduction of non-investment landlord insurances, who are authorised and regulated by the Financial Conduct Authority to provide advice and arrange insurance contracts. Alan Boswell insurance brokers Ltd is registered in England at Prospect House, Rouen Rd, Norwich NR1 1RE, company number 02591252.
Other financial services:
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source https://www.which.co.uk/news/article/which-calls-for-a-crackdown-on-poor-insurance-service-and-value-aS5AV0Z4i6hi