Insurers told to make travel and home policies easier to understand

Insurers need to do more to improve how they handle claims and make it clearer to customers what their policies cover, the UK’s finance regulator has said.

The Financial Conduct Authority (FCA) was responding to a “super-complaint” by consumer group Which? about the home and travel insurance sectors.

The regulator acknowledged some problems needed addressing, and said it would expand its scrutiny of how claims are processed and how clear policies are to customers.

Consumer groups said the FCA must follow this up with strong action and see it as a first step to fundamental reform.

A super-complaint is rare, and only used by consumer groups when they believe a large number of people are being significantly harmed by practices across a particular sector.

Consumer group Which? had argued that the home and travel insurance sectors were “broken”. It said that in some cases making a claim to an insurance company could be a worse experience than the distress of the original incident.

The super-complaint was based on three areas of concern. The first was the way that claims are handled, with many being outsourced by insurers to specialists.

The second was the sales practices of insurers, which the consumer group argued were inappropriate and led to widespread confusion over what was covered in a policy.

Finally, it accused the FCA, as the regulator, of failing to provide an appropriate degree of protection for consumers.

Millions of people across the UK take out insurance policies they hope they will never need to draw on.

Some 22 million home insurance policies were in force last year, with consumers paying more than £7bn in premiums. During the year, consumers made almost 900,000 claims, with insurers paying out a total of £3.2bn.

There were more than 6.8 million travel insurance policies, with premiums of £1.2bn paid last year. Some 600,000 claims led to payouts of more £400m.

But Which? highlighted that acceptance of claims and subsequent payouts were much less likely among home and travel insurance than motor and pet policies.

The FCA found that in 2024, 99% of motor claims were accepted, compared with 80% of standalone single trip travel claims and 74% of home content-only claims.

The regulator said that this, in part, reflected the lower levels of understanding among consumers of what their insurance policy covered.

Graeme Reynolds, director of competition at the FCA, said the regulator would “expand our existing workplan” to ensure improvements to the claims process and consumer understanding of their cover.

“We will continue to hold firms and their senior leaders to account for making improvements, to help build trust and make sure people get fair value insurance,” he said.

The Association of British Insurers (ABI), which represents companies, said the improvements demanded by the FCA were “a top priority” for the sector.

The FCA said it had already addressed various areas of concern in the sector, but consumer groups – including Which? – said more action was needed.

Rocio Concha, Which? director of policy and advocacy, said the FCA must now bring about meaningful change for consumers.

“These issues have been allowed to fester for years, so the FCA must now seize the opportunity to take strong action to stamp out widespread bad practice and issues with how the markets are working,” she said.

James Daley, managing director of consumer group Fairer Finance, said: “The [FCA] response is unlikely to be sufficient to get to grips with the many and growing problems in this sector.

“The insurance market is caught in a race to the bottom on price – leading to the hollowing out of products, as well as poorer claims experiences.”