FCA acts on home and travel insurance super-complaint

The Financial Conduct Authority (FCA) has announced a significant expansion of its regulatory scrutiny of home and travel insurers, responding to a rare super-complaint from consumer group Which? highlighting alleged systemic failures in claims processing and widespread consumer confusion over policy coverage.

The regulator has committed to intensified oversight of claims handling practices and sales processes over the coming year, whilst acknowledging that current standards leave substantial room for improvement. Although 79% of claimants report satisfaction with how their claims were managed, the FCA found that three in 10 consumers lack sufficient information to assess the quality of different insurance products.

Super-complaints represent an exceptional escalatory mechanism, deployed only when consumer organisations identify widespread harm affecting large numbers of people across an entire market. Which? has characterised both sectors as “broken”, with some policyholders finding the experience of making a claim more distressing than the original loss or incident itself.

Market overview and claims data disparities

Home and travel insurance represent substantial consumer markets. Last year, 22 million home insurance policies were in force across the UK, generating over £7bn in premiums. Consumers submitted almost 900,000 claims, with insurers paying out £3.2bn in total. The travel insurance sector comprised more than 6.8 million policies, with £1.2bn paid in premiums and 600,000 claims resulting in payouts exceeding £400m.

However, Which? identified a troubling disparity in claims acceptance rates. FCA data revealed that whilst 99% of motor insurance claims were accepted in 2024, only 80% of standalone single-trip travel claims and 74% of home contents-only claims received approval. The regulator conceded that these lower acceptance rates partly stem from inadequate consumer understanding of policy coverage.

Three pillars of concern

Which?'s super-complaint identified three core problems. Firstly, claims handling processes, with many insurers outsourcing to third-party administrators whose performance may not be adequately supervised. Secondly, sales practices that generate confusion over what policies actually cover, with inappropriate selling methods contributing to unrealistic consumer expectations. Thirdly, Which? criticised the FCA itself for providing insufficient consumer protection.

Regulatory response and enforcement action

Graeme Reynolds, director of competition at the FCA, stated:

“We're expanding our existing workplan to improve the claims process and consumer understanding of their cover. We'll be monitoring consumer outcomes and will continue to hold firms and their senior leaders to account for making improvements, to help build trust and make sure people get fair value insurance.”

The FCA's announcement follows widespread concerns about policy clarity and claims handling practices across the insurance sector.

The FCA disclosed that it had already initiated enforcement action following its July review, including two formal enforcement cases, a business restriction preventing one firm from expanding until deficiencies are remedied, three independent reviews of firms' systems and controls, and commitments from three senior managers to rectify failings and assess redress obligations.

Consumer groups have emphasised that commitments must translate into tangible reform. Rocio Concha, Which? director of policy and advocacy, commented:

Implications for insurers

The FCA's expanded regulatory programme presents substantial compliance challenges for home and travel insurers. Key considerations include:

1. Third-party oversight: Demonstrating robust governance over claims administrators, including documented service standards and systematic performance monitoring.
2. Sales process review: Ensuring point-of-sale materials equip customers with clear information to make informed purchasing decisions, particularly regarding coverage limitations and exclusions.
3. Policy transparency: Reviewing documentation to confirm that policy wording explains coverage scope in plain language that consumers can readily comprehend.
4. Senior accountability: Recognising that individual senior managers may face personal liability for claims handling failures under the Senior Managers and Certification Regime.

Insurers may wish to conduct immediate gap analyses against FCA expectations, prioritising remediation of claims handling procedures and consumer communication materials. With enforcement cases already opened and business restrictions imposed, the regulator has demonstrated willingness to deploy its full supervisory toolkit.

Proactive engagement with the FCA's concerns, supported by measurable improvements in claims acceptance rates and consumer understanding metrics, will be essential to navigate this period of intensified regulatory oversight whilst maintaining customer trust and operational effectiveness.