In 2023, rejection rates for home insurance claims climbed to alarming levels, with data from the Financial Conduct Authority (FCA) revealing that nearly three in 10 claims were denied. This marked an uptick from 2022 figures, with some providers rejecting up to two-thirds of claims. According to Which?, this trend has fuelled discontent among policyholders and cast doubt on the industry’s commitment to supporting customers during challenging times.
Lloyds Insurance Group and other notable providers, such as esure and Rentokil, stood out for low acceptance rates on building-only policies, ranging from 30% to 45%. Meanwhile, complaint rates exceeded 25% for insurers like The AA, whose combined rejection and grievance statistics highlight service shortcomings, the report suggested.
The reasons for the increasing rejections are multifaceted, Which? noted. Some insurers attribute the rise to external pressures such as severe weather events and economic challenges, including inflation and labour shortages. Claims rejections are also often linked to inadequate or misunderstood policy coverage, where consumers unknowingly bypass optional add-ons crucial to their needs.
Dr. Matthew Connell, director of policy and public affairs at the Chartered Insurance Institute (CII), emphasised the importance of transparency and compassion in the sector. “Supporting good customer outcomes goes to the heart of what it means to be a member of the insurance profession, and is central to building public trust and confidence,” Dr. Connell stated. He added that insurers need to “reflect on how they can show greater compassion to customers when they are at their most vulnerable.”
Which? researchers echoed these sentiments, highlighting cases where misaligned expectations led to drawn-out disputes. A case in point involves Lloyds customer Stephen Adshead, who has been battling for a fair settlement for over two years after a severe water leak damaged his home.
Michael Gregson, director of private clients at broker Blackford, pointed to gaps in the digital sales process. He told Which? that reliance on incomplete or generalised customer data during policy underwriting often leaves both insurers and policyholders vulnerable.
Industry experts argued that a shift in approach is urgently needed. Johnny Timpson, an insurance consultant, called for product simplification and clearer risk disclosure. Meanwhile, regulatory bodies like the FCA have vowed to monitor compliance closely and penalise firms failing to meet customer service standards.
“We’re aware insurance complaints are rising, and we’ve taken direct action with firms where we've seen poor customer service,” an FCA spokesperson told Which? “We’ve told firms what we expect, and we’re monitoring the issue across the sector to make sure claims are being dealt with promptly and fairly.”
As insurers tackle operational and financial pressures, they must also prioritise customer trust. Dr. Connell noted the growing “expectation gap between consumers and insurers,” urging firms to address the disconnect to rebuild credibility and ensure a more equitable claims process.
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