FCA review highlights gap between insurance claims service and SMEs’ expectations

A Financial Conduct Authority (FCA) review of insurance claims handling for small and medium-sized enterprises (SMEs) has found the claims service is not consistently working in the interests of many businesses, resulting in a poor claims experience.

The FCA launched a thematic review into claims handling for SMEs because of the vital role that small businesses play in the health of the UK economy. Whilst SMEs’ insurance needs can be relatively complex our review found that they are also less likely to be sophisticated customers and many have similar knowledge and experience to retail consumers when buying general insurance products.

The FCA assessed 25 firms’ involved in the settlement and management of claims, including 5 insurers, 10 insurance intermediaries (including 5 managing general agents)  and 10 loss assessing firms. It also looked at the claims experiences of 100 SMEs. The review focussed on larger claims of over £5000.

Linda Woodall, acting director of supervision at the FCA, said:

"In an area where any delay could have a serious impact on a business or someone's livelihood, it is vital that claims are taken seriously and processed promptly - that means putting customers at the very heart of the process.

"We expect all firms to carefully analyse the findings of the review and make any necessary changes to their approach to ensure that SME claimants are treated fairly."

In 2014, a thematic review revealed that the retail claims experience for individuals was broadly positive. In contrast, the FCA found that there was often a gap between SMEs’ expectations of the claims process and the service that they actually received, with some customers feeling that they had not been treated fairly. For example, in a significant number of cases, poor communication with the claimant led to delays in reaching a settlement.

The FCA also uncovered numerous examples of poor practice in the handling of claims, including:

  • delays in the initial visit by loss adjusters, in some cases it was three weeks before the first visit took place
  • claimants feeling unclear about what actions they should take to minimise disruption to their business
  • dissatisfaction among SMEs about a lack of clarity over who, among the different parties involved in claims handling, was responsible for driving claims outcomes
  • lack of clarity over the next steps in the claims process

In addition, in a significant number of cases the sums insured were inadequate to cover the loss incurred, highlighting the importance for businesses to accurately assess exactly how much cover they need in the event of a major disruption.

The FCA expects customers to be at the heart of how firms run their businesses and for firms to handle claims promptly and clearly communicate the reasons for any delays in the process.

The regulator will also engage with firms, senior figures in the industry, and relevant trade bodies to discuss the findings of the review, its expectations, and the changes that may be required to improve outcomes for SME customers. 

The FCA will also provide feedback to the firms included in the review. Where appropriate, firms may be asked to carry out an internal review to determine whether individual instances of poor claims handling reflects widespread issues within the firm. 

Notes to editors

  1. TR15/6: Handling of insurance claims for Small and Medium-sized Enterprises (SMEs)
  2. In May 2014, the FCA published the thematic review: Insurers’ management of claims – household and retail travel.  
  3. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  4. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  5. You can find more information about the FCA, as well as how it is different to the PRA.