The rules and principles which apply
The Consumer Duty support outcome refers specifically to the requirement that customers should face no unreasonable barriers to submitting a claim.
ICOBS 8.1.1 also requires that an insurer must:
- handle claims promptly and fairly;
- provide reasonable guidance to help a policyholder make a claim;
- provide appropriate information on the progress of a claim;
- not unreasonably reject a claim; and
- settle claims promptly.
In September the FCA issued portfolio letters to General Insurance firms highlighting that firms should make sure consumers have enough information to understand the implications of the different claims settlement options available to them, particularly consumers in vulnerable circumstances.
A review published by the FCA in July found considerable variation between firms in the time they took to settle claims. The 2022 Financial Lives Survey found that 1 in 12 claimants had problems, mainly with the process taking too long, or with poor service or
communication from their provider, when making their most recent claim. The Financial Ombudsman Service’s data for April to June 2023 shows that complaints relating to motor and buildings insurance have reached their highest level in five years, with a rise
in claim delays contributing to the rise. Issues have also been identified with motor total loss claims, where cars are judged total write-offs. In December 2022 the FCA warned insurers about undervaluing cars and other insured items when settling claims. With inflation and cost of living pressures remaining high, The FCA will continue to closely monitor how firms are supporting their customers. The FCA has stated that they expect to continue to focus on claims handling in firms, through multi-firm or thematic reviews, but also data-led interventions on individual firms.
For most intermediaries the acceptance or settlement of a claim will rest with the insurer unless there is any delegated claims authority in place. However, intermediaries do have an obligation under the consumer support outcome to ensure that their support processes make it simple and easy for customers to claim and that they are enabling customers to receive the benefits they are entitled to under the product they have purchased.
The types of issues which have been raised in relation to claims include how firms ensure:
- they handle claims fairly and settle them promptly;
- they provide customers with sufficient information about the claims-handling process;
- they disclose and manage any conflict of interest arising from claims-handling arrangements; and
- they do not impost any unreasonable barriers to customers making a claim.
Outsourcing of claims
The FCA has also noted that outsourcing of claims handling is on the increase. As such, the FCA requires firms to ensure that, where they do outsource elements of the claims handling process, the outsource provider is aware of and able to deliver the firm’s obligations under the support outcome and wider FCA rules relating to claims handling. Firms must regularly monitor outsourced providers to ensure they are meeting the required standard.
How this may affect you
Whilst in most cases brokers will not be responsible for handling claims, it is not uncommon for customers to expect their broker to assist them with the process of making a claim. Brokers may be the first notification point and may be involved in passing information between their customer and the insurance provider.
Firms should therefore be clear on what support they intend to offer customers, document this service and consider publishing it.
Where involvement in the claims process is limited, as a minimum firms should ensure:
- they make it clear to customers how to make a claim by including prominent instructions in customer literature, website etc.;
- they do not make internal claims reporting processes or support channels difficult to navigate or access;
- staff who may be involved in providing advice and support in relation to the claims process should receive appropriate training;
- service standards should be in place to ensure that information that is passed via the broker to the insurance provider and vice versa is done so accurately and promptly; and
- the same standard of service is placed on supporting a customer with making a claim as would be placed on generating the sale of a product
Monitoring the progress of a claim will allow the firm to measure that the service standards of insurers are maintained and may provide useful Management information that firms can use to monitor good customer outcomes; Firms should also consider seeking feedback from customers who have made a claim (see Section H.3.6 Customer support and service MI).
Where a firm handles claims on a delegated claims handling basis, the firm is essentially fulfilling the role of the insurer. In this regard, there are specific issues which such firms should consider including:
- Having a written claims handling process with service levels, including timescales.
- Measuring actual practice against the firm’s service levels and written processes to monitor success and gather appropriate Management Information.
- How the firm will handle any conflict between the interests of the customer and that of the broker in terms of handling the claim (see Section H.2.2 for conduct risk in relation to conflicts of interest and Section A.18 for the SYSC requirements relating to conflicts of interest).
- How the firm will handle any conflict which may rise where two customers of the firm are claiming against each other.
- Sending customers a guide to explain the claims process and the likely timescales within which they can expect their claim to be handled.
- Making the process of making a claim as easy as possible avoiding unreasonable information requests such as the completion of overly lengthy or complex claims forms and requests for evidence that is not relevant to the assessment of the claim.
- Ensure that the channel of support used to make claims is easily accessible and simple to navigate.
- Giving a named contact or reference point of who to contact with queries relating to the claim and keeping the customer regularly informed of the claims progress including explanations for any delays.
- Where a claim is settled, ensure that the settlement is provided to the customer promptly.
- Where a claim is rejected, clearly explaining in writing the reasons for the rejection.