Our latest analysis of Financial Ombudsman Service (FOS) complaints figures has revealed a trend of poor complaints handling in the insurance industry as upheld rates remain stubbornly high.
The average* upheld rate for insurance complaints referred to the FOS stood at 34% for Q3 2023, marking the third consecutive quarter that the rate has stayed above a third, peaking at 36% in Q1 2023.
This is a worrying trend for the insurance industry, particularly with the regulatory focus on customer outcomes following the introduction of the Consumer Duty regime.
The FCA has made it clear that monitoring complaints data is an essential part of the new regulations and with more than a third of complaints being upheld by the regulator, it would not be surprising to see some form of regulatory action later this year for those insurers operating at the wrong end of the market.
The worst performing business line was home emergency cover, with some 46% of complaints upheld by the ombudsman in Q3 2023 – a 16 percentage point increase on the same period a year earlier.
This marks the fifth consecutive quarter for which the product’s upheld rate has increased, hitting levels that haven’t been seen since Q1 2019 when the upheld rate was 47%.
Travel insurance was the business line with the second highest upheld rate at 44%, with both among the most complained about business lines.
Travel insurance was the third most complained about business line with more than 1,200 complaints referred to the FOS in Q3 2023 – equal to 12% of overall insurance complaints.
Home emergency insurance, meanwhile, accounted for 5% of complaints with just over 500 cases referred to the ombudsman over the three months to the end of September 2023.
The most complained about business line was motor insurance, with more than 4,000 complaints – equal to some 39% of total complaints.
Understanding complaints performance across the market will become of even greater importance given the ombudsman’s warning that complaints volumes are set to increase even more over the course of 2024/25.
Abby Thomas, chief executive and chief ombudsman of the FOS, said that “many of those disputes [are] expected to focus on the critical issues that impact people’s everyday lives” and said that the ombudsman has committed to resolving 17% more cases in 2024/25 than in the current year.
This may not be enough to resolve the long-standing delays that have dogged the ombudsman in recent months, however, with cases climbing by more than 30% over the 12 months to the end of September 2023.
*Calculated as a simple unweighted average of the individual business line upheld rates
Insurance DataLab’s market intelligence platform offers deep insights into the complaints handling performance of insurers, breaking down FOS complaints volumes and upheld rates by company, business line, and type of complaint, and on internal company complaints performance from the FCA. Register for your free trial here.
