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FCA tells insurers to improve claims handling

ended 22. July 2025

FCA analysis shows that increases in the cost of motor claims – due to higher prices for cars, parts, labour, energy and more complex cars and supply chains – have contributed to premium increases, according to a report by the regulator published today. The cost of hire vehicles, the number and cost of theft claims and uninsured drivers have also risen significantly. This confirms that increased costs outside of firms’ control, rather than firm profit, were the biggest cause of recent premium rises in motor insurance.

However, the FCA did identify that referral fees from credit hire firms and claims management companies were associated with slower claims processing and increasing costs.

While it saw some good practice in the home and travel sector, it also uncovered concerning evidence of poor claims handling practices, including:

  • Lack of oversight of outsourced services, resulting in poor customer outcomes, delays in settling claims and high complaint volumes;
  • Insufficient management information resulting in failures to promptly identify and resolve claims handling issues and delays;
  • High rejection rates for storm damage claims (only 32% of storm damage claims made to our sample of firms in 2024 resulted in a payment); and
  • Cash settlements being used without sufficient consideration of whether they are most suitable.

Any views, ASAP please.

2 responses from the Newspage community

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Editor
Pete Mugleston
Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk
Claims management companies often market themselves as fighting for the consumer, and in some cases they do help people claim compensation they might have otherwise missed. But their business model is focused on maximising insurer liability, not necessarily delivering faster or fairer outcomes. The key question is whether consumers actually benefit after fees are deducted, or if they are simply being used as a vehicle to extract more from insurers, pushing up costs for everyone.
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David Belle
Founder and Trader at Fink Money
The pandemic led to insurers providing people with new cars rather than just the parts needed for even the most minor claim, because they couldn't actually get the car parts!

Naturally this sent premia higher since a new car is more expensive than a head gasket for instance.

Unfortunately the regulator is packed with people who have zero understanding of the world, so it's no surprise they do not understand the cause.