22nd July 2025
The FCA has uncovered significant issues in the insurance market, including rising complaints, declining claims satisfaction, and ongoing consumer confusion about policy coverage. Additionally, insurers and intermediaries are making large profits from premium finance, disproportionately impacting financially vulnerable households.
“The FCA’s work over the last year has identified a number of failures in the insurance market. Levels of complaints have been rising, claims satisfaction has been falling and it’s clear that consumers continue to struggle to understand exactly what is and isn’t covered by their policies. Meanwhile, insurers and intermediaries are making very high profit margins from premium finance - piling financial pressure on the least resilient households.
“Sadly, today’s raft of papers from the regulator show a distinct lack of ambition in terms of remedies. The premium finance market study interim report gives no indication of what the FCA plans to do to repair this market. However, it has ruled out the most radical solutions - which could be most effective at saving money for low income households. “In response to poor claims handling, the focus looks to be on reminding firms about their obligations under Consumer Duty. We’re not convinced any of this will be enough to make the big shift in standards that is needed in this market. As things stand, consumers continue to struggle to understand the differences between insurance products - and price comparison sites and insurers are still not doing enough to support with this challenge. But even if consumers manage to buy a product that meets their needs, they still have no reliable way of knowing whether the insurer will treat them fairly at claims stage. And the FCA’s research shows that there is a wide difference in standards at this crucial moment.
“In terms of their review of the impact of the general insurance pricing practices policy, it is strange that the FCA has tried to distance itself from the idea that this led to accelerated hollowing out. The paper cites research which shows the number of essentials policies tripled after Gipp came into force - but claims it didn’t have enough data to show whether that was as a result of its policy. It’s certainly true that it’s difficult to separate the impact of Gipp from the significant inflation that we saw around the same time as its implementation. But the FCA should be ready to acknowledge that it played a part both in driving prices up and accelerating hollowing out. More importantly, however, is what it plans to do to address this problem. Many car insurance policies no longer even include windscreen cover - and consumer understanding of the cost of windscreen claims has not kept up with these significant changes in the market. Consumer Duty nudges are unlikely to drive the step change raise in standards and consumer understanding that is needed.”
Yesterday, Fairer Finance released its insurance pricing study that calls time on unfair and discriminatory pricing models used by car and home insurers in the UK - driving a “poverty premium” and penalising Britain’s most vulnerable families – read here for more -