Insurers urged to improve communications over rejected claims

Insurers must “up their game” and provide precise feedback to policyholders on why their claims are not being accepted in full or risk falling foul of the consumer duty, as new research from Which? highlights a lack of clarity in communications.

The consumer research organisation surveyed more than 2,200 car insurance and 1,500 home insurance customers who made a claim within the last two years in November 2022.

Which? also surveyed 804 travel insurance claimants who had made a claim within the last two years in March 2023.

The findings highlighted a significant lack of clarity, with three quarters (77%) of car insurance customers reporting they were not given an explanation by their insurer for rejected, partially accepted or disputed claims.

When quizzed on what the outcome of the claim was, one in seven (14%) reported that their claim was either partially accepted, rejected or in dispute.

This was also the case for more than a fifth (22%) of home insurance claimants and almost two in five (38%) of travel insurance claimants surveyed.

More than half (56%) of home insurance claimants and more than four in 10 (43%) travel insurance claimants whose claim was not fully accepted said they did not receive an explanation as to why.

Which? said a lack of an explanation can lead to consumers feeling confused and angry.

Challenging the decision also becomes more difficult, either with the insurer directly or when taking a complaint to the Financial Ombudsman Service, a fact that could leave insurers in breach of the Financial Conduct Authority’s (FCA) new consumer duty.

The consumer duty, a set of higher and clearer standards of consumer protections, requires financial services organisations to ensure that any communications are easy to understand.

Little or no explanation as to how insurers come to decisions on rejected, partially accepted or disputed claims could be introducing vagueness to the process, making it needlessly difficult for those who are not tenacious or confident enough to pursue clarification.

Commenting on the research, Sam Richardson, deputy editor of Which? Money, said: “No one wants to be in the position where they have to claim on their insurance—still less have that claim be turned down. But not getting an explanation for why a claim hasn’t been accepted in full isn’t just frustrating—it puts you, the consumer, at a serious disadvantage.

“Claimants who don’t get the full picture from their insurers will struggle to take their claim to the Ombudsman, as they don’t have much information to prove where they and their insurer disagree.

“Insurers need to up their game and let claimants know precisely why their claims are not being accepted in full—and as part of its new consumer duty, the FCA should clamp down on firms that fall below the required standards.”

In response, an Association of British Insurers spokesperson said: “Insurance is there to protect you when things go wrong and our data shows that the vast majority of claims are accepted.

“However, we can appreciate that it is frustrating when a claim is declined and knowing why is crucial. Our members are always looking at ways to improve communication with customers and know that sharing information in a clear, accessible and timely way is vital.

“If you’re unhappy with how your claim has been handled and wish to make a complaint, you should follow your insurer’s complaints process in the first instance.

“If you’re unsatisfied with the process, you can then contact the Financial Ombudsman Service. Insurers will always aim to deal with complaints as swiftly as possible and will work with the FOS to understand where any learnings can be made.”

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Mark Dugdale