U.K., Oct. 23 -- UK Parliament issued the following news:
The Financial Services Regulation Committee has today published its report Home and travel insurance regulation: more for the FCA to do.
Report: Home and travel insurance regulation: more for the FCA to do (HTML)
Report: Home and travel insurance regulation: more for the FCA to do (PDF)
Inquiry: Regulation of the consumer insurance market
Financial Services Regulation Committee
The inquiry
The Financial Services Regulation Committee, chaired by The Baroness Noakes DBE, launched an inquiry in May into the regulation of consumer home and travel insurance, with a focus on the Financial Conduct Authority’s approach.
Key conclusions and recommendations
The Committee’s report includes findings that:
Home and travel insurance products have low claims acceptance rates relative to other retail insurance products. They are inherently complex and consumer understanding remains low, despite the FCA’s Consumer Duty requiring firms to support it.
Price comparison websites have driven intense price-led competition in the UK market. This has helped consumers find affordable products, but has led to a focus on price rather than overall product value.
There is a lack of readily available and comparable data on elements of product value other than price, especially claims outcomes. This inhibits consumers from comparing products and prevents price comparison websites from comparing product value effectively.
The effects of poor consumer understanding often become clear only when a claim is made. Products purchased on price rather than levels of cover, and a lack of understanding about what is and is not covered, both contribute to persistently high rates of declined claims.
Claims experiences can vary significantly. The FCA has acknowledged the need for further work on claims-handling practices that carry a higher risk of consumer harm, including outsourced claims handling and cash settlements.
There are concerns about the growing use of AI by consumers to research home and travel insurance, which is not regulated by the FCA.
The Consumer Duty has not yet translated into improvements for consumers.
Clear expectations and robust outcomes data are key to the success of the Consumer Duty.
The FCA has a number of actions in train but the timetables for completion are not clear.
The report recommends that:
The industry and the FCA must accelerate their work to improve consumer understanding of home and travel insurance products, particularly what is and is not covered by policies.
The FCA must outline how it will address poor claims-handling practices.
The FCA should consider what it can do to make consumers aware of the potential problems of relying on AI when making insurance purchasing decisions.
In the absence of the industry agreeing on comparable metrics, the FCA should step in to ensure that comparable outcomes data is widely available. The FCA should also develop how it measures the impact of the Consumer Duty, in order to realise its potential to improve consumer outcomes.
The FCA is pursuing many of the issues outlined, but the timetables for completion are unclear. The FCA should produce a roadmap with clear timescales for delivery.
Chairman’s comments
On publication of the report, Baroness Noakes DBE, Chairman of the House of Lords Financial Services Regulation Committee, said:
“Comparison websites have made it easier for people to find cheaper insurance, but the lack of good data on other aspects of product value means that many home and travel policies are chosen on price alone.
“The industry and the FCA need to speed up and improve their efforts to help people better understand home and travel insurance, especially what their policies do and do not cover. It is concerning that many of these problems around consumer understanding and comparable data are well known among industry and the FCA, but that significant progress has not yet been made.
“We know that the FCA is undertaking various pieces of work to make progress on many of the issues our report has highlighted, but the timescales are not clear, and it should produce a roadmap of what it is doing.”
Further information
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