Analysis of the Financial Ombudsman Service’s (FOS) recent complaints figures indicates a persistent issue with complaints handling within the insurance sector, as the proportion of upheld complaints remains significantly high.
According to Insurance DataLab, the average upheld rate for insurance complaints referred to the FOS was at 34% for the third quarter of 2023. This marked the third consecutive quarter that the rate was above 30%, having peaked at 36% in the first quarter of the year.
Home emergency cover demonstrated the poorest performance among insurance lines, with 46% of complaints upheld by the ombudsman in the third quarter of 2023.
This was a 16-percentage point increase compared to the same period last year. At the same time, this was the fifth consecutive quarter of rising upheld rates, reaching a level last observed in early 2019 when the rate was 47%.
Travel insurance also showed a troublingly high upheld rate of 44%, up from 22% in Q3 2022.
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In addition to their high upheld rates, both home emergency and travel insurance were also among the lines with the most complaints.
Travel insurance alone accounted for 12% of all insurance complaints, with over 1,200 complaints referred to the FOS in the third quarter of 2023. Home emergency insurance represented 5% of total complaints, with just over 500 complaints made in the same period.
Motor insurance was highlighted as the business line receiving the most complaints, with over 4,000 instances accounting for approximately 39% of total complaints filed.
Matt Scott, co-founder of Insurance DataLab, expressed concerns over these figures and said they suggest a “worrying trend for the insurance industry, particularly with the regulatory focus on customer outcomes in the wake of the new Consumer Duty regulations.”
“Having more than a third of complaints upheld by the ombudsman should be unacceptable for any insurer, and with so many business lines demonstrating such a high upheld rate I would not be surprised to see some form of regulatory action later this year,” he added.
Scott also referenced the regulatory implications of these high figures, stating that “the FCA has made it clear that monitoring complaints data is an essential part of the new regulations.”
“This demonstrates just how much still needs to be done to bring the industry in line with customer expectations,” he said.
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