The latest consumer complaints figures from the Financial Ombudsman Service (FOS) revealed worrying trends for the industry ahead of the deadline for Consumer Duty, according to a new report from Insurance DataLab.
Many lines across the industry have reported increasingly high upheld rates, with the special events insurance being the worst performer at 57% complaints upheld for the customer in the first quarter of 2023. This means that the insurer made the wrong decision in more than half of all cases closed over the period, representing an increase of 18% over the same period in 2022.
The line with the second-highest upheld rate with the FOS is building warranties, with 44% of complaints in favour of the customer. This represents a 17% increase over Q1 in 2022. That said, both special events insurance and building warranties had low levels of complaints, receiving 35 and 78, respectively.
This is in stark contrast with travel insurance, the insurance line with the third-highest upheld rate at 43%. Travel insurance was the third most complained-about business line of Q1 2023 with a total of 1,426 complaints referred to the ombudsman. This represents a 186% increase over the same period last year.
Car and motorcycle insurance and buildings insurance were two other lines to receive more than 1,000 complaints in the first quarter. Car and motorcycle insurance accounted for 4,221 complaints, up 51% YoY, while buildings insurance received 1,805 complaints, up 25% over the same period. Both lines also reported high upheld rates, with 33% of car and motorcycle insurance complaints upheld and 39% for building insurance.
Of all the general insurance lines, only gadget insurance reported an improved upheld rate. For this line, the FOS upheld 34% of cases in this quarter compared to 31% in Q1 2022.
Insurance DataLab co-founder Dan King said that with the Financial Conduct Authority (FCA) looking for outliers in this kind of data, firms with particularly high upheld rates will find themselves under intense scrutiny.
“This should make for worrying reading for insurers, especially with the Consumer Duty implementation deadline looming large on the horizon. More than one in three complaints being upheld in favour of the customer and a significant increase in the number of complaints being referred to the FOS does not exactly scream ‘fair value,’” King said.
Earlier this year, Insurance DataLab revealed that motor insurance complaints topped the list of general insurance (GI) grievances in the UK in a period spanning the last five years.
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