Which? super-complaint draws a mixed response

UK-based consumer organisation Which? announced that it was launching a super-complaint to industry regulator the Financial Conduct Authority (FCA) on 23 September.

The super-complaint, which was backed up by original research conducted by the organisation over the preceding year, accused the travel and home insurance sectors of offering a poor standard of service, and some of the lowest claims acceptance rates across all sectors.

Which? argued that the findings “pointed to systemic problems with how policies are sold and explained, and also with how claims are then handled”.

However, reception towards the super-complaint has been mixed – while the challenge is broadly recognised as a chance for improvement, some have questioned the findings of the report.

A complex market

Ian Hughes, CEO of Consumer Intelligence, a consumer insights organisation focused on the insurance sector, argued that while the concerns raised by the super-complaint “deserve attention”, the evidence used as the basis for it “is far too thin to justify sweeping regulatory intervention”.

He felt that the analysis relied too heavily on limited and potentially unrepresentative samples, as well as on “anecdotal case studies”, and didn’t adequately adjust for the greater complexity of travel claims compared with those in other types of insurance. This includes “medical issues abroad, foreign healthcare systems, third-party providers, and documentation challenges”.

“Those complexities inevitably create more friction compared with, say, motor claims,” Hughes said, warning that if regulators acted without acknowledging this difference, they risked increasing costs for consumers without solving the underlying issues.

Case studies of individual cases, he added, while powerful, “cannot tell us whether those experiences are typical or exceptional” when presented “without a representative baseline” – potentially creating a distorted picture of the situation at hand.

James Daley, Managing Director of consumer group Fairer Finance, agreed that “travel insurance products are particularly complex, and many consumers have no understanding of what is and isn’t covered” – leading to potential issues.

However, he argued that the issues caused by the greater complexity of travel insurance were being exacerbated by insurers’ failure to support customers in understanding “differences in cover and the quality of services”.

“Without any reliable information to understand what they are buying and which insurers can be trusted, most consumers end up focusing on price,” Daley said. “This drives hollowing out of policies, and allows firms to prioritise cost control over service at the claims stage.”

Hughes also argued that the report that backed up the super-complaint mistakenly presented correlation “as if it were causation”. “For example,” he explained, “higher uphold rates at the Financial Ombudsman Service are cited as evidence of systemic misconduct, when in fact they may simply reflect the fact that the most complex or borderline cases are the ones escalated to the ombudsman.”

“Similarly,” Hughes added, “cases involving vulnerable customers are more likely to feature difficult circumstances, which doesn’t automatically mean insurers acted unfairly.”

Daley also stated that Which? was right to point to a “low percentage of claims paid, as well as a rising number of complaints in both travel and home insurance”. However, he added that this situation was not unique to these fields of coverage – with similar issues in car and pet insurance – but said that they were trends that Fairer Finance had been observing “for a few years”.

Not a free pass to offer poor service

Hughes broadly agreed, adding that his critiques should not be seen as a “free pass” for insurers to carry on offering poor service.

“Our research shows that service quality varies widely, terms and conditions are often complex, and some firms do hide behind the small print more than others,” he said. “There is also a lack of high-quality data about actual consumer outcomes at the point of purchase. This isn’t just a regulatory issue; if insurers wait to be slapped by the FCA and only then respond, they will look like a bear with a bee in its mouth. But the real losers will be travellers.”

He concluded that there is a real opportunity in the wake of the Which? super-complaint for companies to shine, and to demonstrate “transparency and fairness”.

“Travel insurance is essential for people who travel abroad,” Daley concluded. “It is in everyone’s interests that we resolve these issues and create a market that consumers trust and value.”

“The case for change is overwhelming”

Rocio Concha, Director of Policy and Advocacy at Which?, responded by stating that it was important that the insurance industry “takes heed of both our in-depth research and also the real-life examples of consumer harm caused by poor claims handling that we set out in our super-complaint”.

She further stated: “Our research builds on the FCA’s own reviews and shows that the case for change is overwhelming. The regulator must act now as poor practices have been tolerated for too long. Consumer trust in insurance has been consistently poor for years, and claims acceptance rates – particularly for home and travel insurance – have dropped to concerningly low levels.

“While these markets may be complex, that does not negate insurers’ responsibility to deal with claims fairly and with compassion,” Concha concluded. “Our super-complaint should be welcomed by insurers that do the right thing by their customers. They should have confidence that they won’t be undercut by unscrupulous rivals who are allowed to play fast and loose with the rules, but instead should be supported to invest and drive up standards across the industry.”

The views expressed in this article are those of the commentators interviewed and do not necessarily represent the position of ITIJ.