Complaints about motor insurers surge

Grievances towards motor insurers reached a new peak in the last 12 months, with Insurance DataLab highlighting that complaints about the sector rose by almost a fifth (18.2%) over the last year.

As per figures from the Financial Conduct Authority (FCA) analysed by the analytics firm, customers in the UK made more than 280,000 complaints about motor insurance from the second half of 2023 onwards, up from under 240,000 during the same period in 2022.

These figures go on to show that more than 2.5 million complaints have been logged against products in the sector, making motor insurance the most grieved about business line in the UKGI. In response, insurers have compensated nearly £580 million to address these motor insurance complaints.

Comparatively, property insurance, the second most contentious category, registered just under one million complaints over the same period, with nearly £356m paid in redress.

The report also highlighted significant complaint volumes in other insurance products such as medical/health insurance, warranties, and assistance products. However, a noteworthy shift has been observed in the industry’s upheld rates — the percentage of complaints resolved in favour of customers.

These rates have decreased recently to 58% in the second half of 2023, down from a peak of 67% in the first half of 2022 following the Covid-19 pandemic.

Matt Scott, co-founder of Insurance DataLab, commented on the worrying trends in the sector and the problems that it poses for businesses.

“While the recent drop in upheld rates might seem positive at first glance, it raises concerns about the underlying issues insurers face. It is important to remember that these figures relate to internal complaints handled by the insurer, and when complaints are not upheld there are many that will be referred on to the Financial Ombudsman Service (FOS) by the policyholder,” Scott said.

He further explained the increasing trend of referrals to the FOS and a corresponding rise in the proportion of complaints upheld by the ombudsman.

“So, while a falling upheld rate in the FCA figures may appear to be a positive for the industry, it may just be masking a problem if these decisions are later overturned by the ombudsman,” Scott said.

Scott also stressed the importance for insurers to address these issues proactively, especially as Consumer Duty is now in full swing.

“This should be of particular concern for insurers, not only because of the reputational damage this may cause to their brand, but also because of the risk of regulatory action. Consumer Duty means that the FCA has never been more interested in customer outcomes and this type of data. Insurers need to sit up and take notice, otherwise the industry could soon be facing a serious reputational crisis,” he said.

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