ILC ARTICLE

Are insurers handling claims fairly?

22nd July 2019

Complaints about them rise 61% in just five years and one in three cases are upheld in favour of the customer

Insurance complaints have rocketed in the last five years – with one in three upheld in favour of the customer by the Financial Ombudsman Service, a new report has revealed.

There were 25,122 travel, home and car insurance gripes escalated by policyholders between April 2018 and March 2019 FOS figures show – a 61 per cent rise on five years ago, according to analysis by consumer group Which?.

Some 31 per cent of these complaints were found to be in favour of the policyholder – meaning the insurer either reconsidered its decision or was obliged to pay out. 

However, the proportion of upheld complaints has drifted slightly lower in the last five years. 

Data: Insurance complaints have soared by 61% in the last five years, according to a new report

Buildings insurance was found to be the worst area for complaints, seeing a 42 per cent rise compared to last year, with 35 per cent of cases handed to the FOS ruled in favour of the customer.

Graph highlighting how many upheld complaints involving policy exclusions there have been 

Which? also examined three commonly disputed issues between policyholders and insurers by analysing five years worth of complaints data.

The watchdog found that 28 per cent of disputes resolved in favour of the policyholder were about exclusions – small differences within policy wording that ultimately resulted in a claim being denied.

This issue was dominant in pet insurance complaints in 2018, with 79 per cent of those examined upheld.

In one situation, a complaint was upheld by the ombudsman against pet insurer, Red Sands, after it rejected a claim for a policyholder’s dog.

The dog had eaten a lolly stick which had then become lodged in its gut, threatening to cause internal damage.

Following the dog’s prior treatment for diarrhoea, Red Sands had excluded all claims related to the digestive system and so refused to pay.

Another 12 per cent of complaints upheld by the ombudsman involved disputes about non-disclosure, where insurers declined a claim on the grounds they had been misinformed about the policyholder’s circumstances.

One case was upheld against car insurer, Zenith, after it voided a customer’s policy as they had accidentally entered the date their daughter obtained her provisional license instead of the date she passed her driving test.

A further 11 per cent of complaints that were upheld were about a pre-existing condition – an issue relevant for both pet and travel insurance policies.

In one case, an Axa customer complained when their insurer declined a claim after they had surgery abroad for a disc hernia but had failed to declare they’d received over the counter medications for back pain and self-refer for physiotherapy.

The ombudsman ruled in their favour as ‘treatment’ was not adequately defined in the policy wording.

While there are a number of other reasons why an insurer may decline a claim, it is worth going to the ombudsman if the reason seems unfair or unclear, for a review of the case and to settle the dispute.

Jenny Ross, Which? money editor, said: ‘Our analysis reveals a steep rise in insurance complaints referred to the ombudsman, and while it is encouraging that consumers feel empowered to challenge insurers, we have concerns that firms may not be handling claims fairly.’

‘When choosing an insurance firm it’s worth checking its record with the ombudsman to gauge how it treats customers – a firm with a high proportion of complaints upheld in favour of customers should be a red flag.’

The Association of British Insurers, however, claimed that pay out rates are high.  

A spokesperson for the ABI said: ‘Insurers continually work to reduce the scope for complaints, as no insurer wants an unhappy customer. 

‘The complaints number cited by Which? makes up just 0.04 per cent of all current home, motor and travel policies. 

‘Pay out rates on these policies are high: 98 per cent for motor claims, 87 per cent for travel, and 83 per cent for home insurance. 

‘Our analysis shows that declined home insurance claims are often due to misunderstandings over what is covered, and we have worked on raising consumer awareness in this area, so that customers get the most from their cover.’