Financial Services Regulation Committee
Wednesday 10th June 2026
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10:04
Speaker 1
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Speaker 1
Welcome to today's meeting, which is the first oral session as part of the committee's inquiry into the regulation of consumer insurance market. And I thank you, Mr. Scott, for attending. This session is open to the public. It's broadcast live and is subsequently accessible via the parliamentary website. A verbatim transcript will be taken of the evidence and will be put on the parliamentary website. Um. Mr.. Mr. Scott, um, would you like just to introduce yourself and your, your your background?Sure.
10:05
Speaker 2
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Speaker 2
Yes. Matt Scott. I'm the co-founder of Insurance Datalab market intelligence firm for the insurance industry. And my background originally was in Pensions World and the work at Aon retrained as an insurance journalist and then set up this business around five, six years ago, essentially to help provide kind of comparable digestible data on performance of insurance companies.
10:05
10:05
Speaker 2
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Speaker 2
And I think in terms of being able to go out and find the products, it's very easy. You know, there's kind of direct insurers, there's brokers, and there's the price comparison websites understanding maybe there's a bit more work to do. I think, um, some consumers find at the point of claim that maybe the policy they bought isn't necessarily what they thought they'd bought, so they may not be understanding. 8 billion of premiums now. And I think in terms of being able to go out and find the products, it's very easy.
You know, there's kind of direct insurers, there's brokers, and there's the price comparison websites understanding maybe there's a bit more work to do. I think, um, some consumers find at the point of claim that maybe the policy they bought isn't necessarily what they thought they'd bought, so they may not be understanding some of the definitions. Some of the exclusions, you know, what is and isn't covered under the policy. And I think there's been a fair bit of work done by the industry to make that, quote, process kind of quicker and easier.
And maybe sometimes it's been, I suppose, sped up a bit too much. And maybe some of that explanation is lacking. It's quite a technical contract that's being entered into. And I think sometimes there could be maybe an argument for slowing that process down to help with understanding so people know more what they're buying. So then when it comes to the point of claim, they know what is and isn't covered by the policy.
You know, there's kind of direct insurers, there's brokers, and there's the price comparison websites understanding maybe there's a bit more work to do. I think, um, some consumers find at the point of claim that maybe the policy they bought isn't necessarily what they thought they'd bought, so they may not be understanding some of the definitions. Some of the exclusions, you know, what is and isn't covered under the policy. And I think there's been a fair bit of work done by the industry to make that, quote, process kind of quicker and easier.
And maybe sometimes it's been, I suppose, sped up a bit too much. And maybe some of that explanation is lacking. It's quite a technical contract that's being entered into. And I think sometimes there could be maybe an argument for slowing that process down to help with understanding so people know more what they're buying. So then when it comes to the point of claim, they know what is and isn't covered by the policy.
10:06
10:07
Speaker 2
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Speaker 2
I think of as explained in the right way, and I think that's the issue at the moment. I think if it's all hidden away in, you know, terms and conditions, people aren't going to see it. But for example, on a building's insurance policy where claims acceptance rates are really low, I think a lot of that is because people don't understand that things like storm damage are often excluded. They may be expected to be covered by the policy. If there's a storm and their fence gets blown down, for example.
And I think explaining that upfront that things like this are excluded from the policy and not covered, I think that could help them understand. So it's more the the cover and what isn't covered, rather than the intricacies of, you know, the legal detail, really.
And I think explaining that upfront that things like this are excluded from the policy and not covered, I think that could help them understand. So it's more the the cover and what isn't covered, rather than the intricacies of, you know, the legal detail, really.
10:07
10:07
10:07
Speaker 2
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Speaker 2
I think they definitely have helped. Um, it's made it a lot easier to compare policies on price primarily. Um, but so it's definitely helped with kind of people do that instead of having to go around, you know, all the different providers. But I think the issue is sometimes maybe there's a bit too much of a focus on price insurance is, is a grudge purchase really no one wants to buy it. And I think by making it easier to compare on price, um, that maybe drives a bit of a race to the bottom in terms of the premium being paid.
You do have things like the de facto ratings where you can see the, the breadth of the coverage to a certain degree with that five star rating. But there's nothing that, I suppose shows how the policy performs when it comes to, you know, actually being used around, you know, how claims are accepted, how good the insurer is at that part of the of the promise. And I think that's maybe somewhere where it has made it a bit of a price driven purchase, whereas really, you need to look more at the value of what is covered.
And I think some in recent years, things like the general insurance pricing practices has kind of fueled that a bit more. The introduction of some of the more, um, kind of almost value products whereby they're cheaper policies, but they have less, less coverage. I think that's maybe fuelled that a bit more. And people are more focused on the price, especially with premiums having gone up in the past. So that's maybe a bit of an issue there. Too much of a focus on price and less on the outcomes that are being delivered.
You do have things like the de facto ratings where you can see the, the breadth of the coverage to a certain degree with that five star rating. But there's nothing that, I suppose shows how the policy performs when it comes to, you know, actually being used around, you know, how claims are accepted, how good the insurer is at that part of the of the promise. And I think that's maybe somewhere where it has made it a bit of a price driven purchase, whereas really, you need to look more at the value of what is covered.
And I think some in recent years, things like the general insurance pricing practices has kind of fueled that a bit more. The introduction of some of the more, um, kind of almost value products whereby they're cheaper policies, but they have less, less coverage. I think that's maybe fuelled that a bit more. And people are more focused on the price, especially with premiums having gone up in the past. So that's maybe a bit of an issue there. Too much of a focus on price and less on the outcomes that are being delivered.
10:09
10:09
Speaker 4
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Speaker 4
Is there any information available to people considering buying insurance of the. Um, different degrees to which insurance companies make it easy or difficult to claim or resist claims and try and, uh, bore. The claimant off. I should declare an interest. I'm on my wife on my behalf, just about to make a claim to insurance company, but we haven't yet done so. So we don't know whether we're going to be treated like that or not.
10:09
Speaker 2
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Speaker 2
Yeah. So I mean, the data is there, but it's not easy for a consumer to find really. So insurance data we for example, analyze claims acceptance rates to look at how many are accepted by insurer across different business lines, um, as well as other metrics. But it's not something that's publicly made available. It's something that I think maybe should be made available by the aggregators. Um, for example, you see it in some other markets, like in I think life insurance.
They say stuff like 99% of claims accepted. You don't tend to see that more in like the general insurance side of things, but I think it's something that could be made available and would definitely help. I mean, if you're comparing policies and you see one insurer accepts 90% and another 50%, then that's a, that's a big difference. And I think that's something that probably should be made available to the public. Thank you.
They say stuff like 99% of claims accepted. You don't tend to see that more in like the general insurance side of things, but I think it's something that could be made available and would definitely help. I mean, if you're comparing policies and you see one insurer accepts 90% and another 50%, then that's a, that's a big difference. And I think that's something that probably should be made available to the public. Thank you.
10:11
10:11
10:11
Speaker 2
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Speaker 2
Yeah. So, um, there's been a big focus on um kind of claims handling, um, with, you know, the, which super complaint with things like fair value assessments, consumer duty, it's become more under the spotlight. Um, and I think it's fair to say that the industry does have a, you know, a bit of a problem with public perception. Um, I think to a degree, unfairly degree warranted as well. Um, so I think sometimes it's kind of assumed that insurers maybe don't want to pay claims or they try and refuse them, they don't make that.
But I think that in the grand scheme of things, valid claims, they do want to pay. They want to pay them quickly because it's good for their business as well. It costs them less, essentially, if they're doing it in a quick way. But I think that that issue persists. I think they are monitoring it more so with the reporting that's come in under consumer duty and that kind of thing. There's definitely more of a spotlight on that. I don't think that is necessarily translated into an improvement in outcomes yet.
We're seeing some metrics improve. Um, but others maybe have actually worsened. So sorry, I just got some stats here in terms of the claims acceptance rates I spoke about earlier, since fair value came in in 2021, and the acceptance rate for travel insurance, for example, has gone up between 2 and 5%. So it's improved slightly.
But I think that in the grand scheme of things, valid claims, they do want to pay. They want to pay them quickly because it's good for their business as well. It costs them less, essentially, if they're doing it in a quick way. But I think that that issue persists. I think they are monitoring it more so with the reporting that's come in under consumer duty and that kind of thing. There's definitely more of a spotlight on that. I don't think that is necessarily translated into an improvement in outcomes yet.
We're seeing some metrics improve. Um, but others maybe have actually worsened. So sorry, I just got some stats here in terms of the claims acceptance rates I spoke about earlier, since fair value came in in 2021, and the acceptance rate for travel insurance, for example, has gone up between 2 and 5%. So it's improved slightly.
10:12
10:12
Speaker 2
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Speaker 2
Uh, 2 to 5%. Whereas in home insurance, those acceptance rates have gone down by 5 to 6, depending on what type of policy it is. And then since consumer duty came in in 2023, contents has improved by 11%, 11 percentage points. Whereas, um, kind of the other markets, sorry, travel insurance is flat to 6% improved as well. Whereas things like buildings insurance is down 9% and combined contents and buildings is down 6%. So those metrics have travel has improved.
The others have deteriorated a bit over that time. Maybe the exception of contents. Um, but we are seeing a large variation. So we're seeing that range in buildings insurance or home insurance from like 45% to 100%. So there's a lot of variation in that. So some companies have improved, others have declined a bit. Um, and then if you look at the complaints trends largely flat, there hasn't been a massive improvement. Maybe some have come slightly down.
Um, so I think minimal impact yet whether things will change going forward is hard to say because there has been that focus on it. And I think the other thing to look at is how it's the, I suppose the operational impact as well, um, has driven up costs quite a bit for, for a lot of insurance companies, particularly brokers. And I think, um, I've heard, you know, some instances where brokers have had to sell their business because the cost of regulations become too high. Fair value assessments, for example, you could see brokers doing, you know, thousands of assessments across the different insurers and products they sell.
And that has led to some reducing the number of insurers they work with as well. So there's been a bit of a negative there in terms of choice through some channels, which is bad for the consumer as well. Um, so that's kind of yeah, I think it's minimal positive impact on outcomes at the moment. Um, could still come, but I think, yeah, not quite come through yet.
The others have deteriorated a bit over that time. Maybe the exception of contents. Um, but we are seeing a large variation. So we're seeing that range in buildings insurance or home insurance from like 45% to 100%. So there's a lot of variation in that. So some companies have improved, others have declined a bit. Um, and then if you look at the complaints trends largely flat, there hasn't been a massive improvement. Maybe some have come slightly down.
Um, so I think minimal impact yet whether things will change going forward is hard to say because there has been that focus on it. And I think the other thing to look at is how it's the, I suppose the operational impact as well, um, has driven up costs quite a bit for, for a lot of insurance companies, particularly brokers. And I think, um, I've heard, you know, some instances where brokers have had to sell their business because the cost of regulations become too high. Fair value assessments, for example, you could see brokers doing, you know, thousands of assessments across the different insurers and products they sell.
And that has led to some reducing the number of insurers they work with as well. So there's been a bit of a negative there in terms of choice through some channels, which is bad for the consumer as well. Um, so that's kind of yeah, I think it's minimal positive impact on outcomes at the moment. Um, could still come, but I think, yeah, not quite come through yet.
10:15
Speaker 5
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Speaker 5
I raise one slightly more general question. Um, you very kindly provided a briefing and you started by quoting Peter Drucker and you raised the issue of the importance of culture and what struck. I mean, I knew Drucker and was on a company in America for 15 years. And Drucker was very closely involved with that. I think culture is absolutely critical. The question I was left with as I finished reading your briefing, was, to what extent are we dealing here with culture or regulation?Um, and to what extent through regulation are we trying to change culture?And if we were trying to change culture, are there different ways of doing it?
10:15
10:15
Speaker 5
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Speaker 5
I mean, for example, would you, we, for example, built a very strong relationship with Harvard Business School, and they did about ten case studies on us in the end. And members of staff at Harvard Business School wrote books on the subject and so on. And it does seem to me that you've opened the gates very wide in your briefing.
10:16
Speaker 2
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Speaker 2
So I think that we're seeing different responses in different companies, to be honest. And I have I've never worked in an insurance company, so I maybe can't comment too much, but I think from conversations I've had, you see some insurers who, you know, they engage very deeply with the Ombudsman, for example, the Financial Ombudsman Service, to really understand what those complaints are about, what the root cause of those was and were, and why the Ombudsman came to the decision. They did, particularly when they've been upheld in favour of the customer.
I think you see that a lot. You see a lot of companies who have really drilled down into their policy wordings and how they are read by people and how the claims journeys are managed as well, whereas others maybe have seen it as a bit more of a tick box exercise. So I think it is very much dependent on what the culture in that organisation was beforehand and how focused maybe they were on the customer before that, the regulations came into force in terms of changing culture.
I think trying to change culture by introducing rules, probably personal opinion isn't going to succeed with that. I think if your culture is against what the regulations are going to be trying to achieve, then you probably push back against that a bit, um, and maybe see that more as a tick box exercise. Whereas if you're more open to, to that, then you're going to embrace it a bit more and really see the benefits of it. Because I think that there are real benefits to be had from embracing these regulations and really focusing on the customer and what outcomes they're getting, because for one, it delivers a better service to your customers, which means they're going to be more loyal to you.
And we've seen that it also helps improve financial results as well. If you're offering a good customer service, then it does translate to better underwriting and better profits. So there's kind of a win win for those companies that do embrace it really.
I think you see that a lot. You see a lot of companies who have really drilled down into their policy wordings and how they are read by people and how the claims journeys are managed as well, whereas others maybe have seen it as a bit more of a tick box exercise. So I think it is very much dependent on what the culture in that organisation was beforehand and how focused maybe they were on the customer before that, the regulations came into force in terms of changing culture.
I think trying to change culture by introducing rules, probably personal opinion isn't going to succeed with that. I think if your culture is against what the regulations are going to be trying to achieve, then you probably push back against that a bit, um, and maybe see that more as a tick box exercise. Whereas if you're more open to, to that, then you're going to embrace it a bit more and really see the benefits of it. Because I think that there are real benefits to be had from embracing these regulations and really focusing on the customer and what outcomes they're getting, because for one, it delivers a better service to your customers, which means they're going to be more loyal to you.
And we've seen that it also helps improve financial results as well. If you're offering a good customer service, then it does translate to better underwriting and better profits. So there's kind of a win win for those companies that do embrace it really.
10:17
10:17
10:17
Speaker 7
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Speaker 7
Let's stick with with the thought underlying Lord Griffiths. Um question if we may for a minute that. Can you can you just try to unpack for us the. Contribution. That you think regulation has. Made either to things getting better or to things getting worse. You you just now used an example of um. Insurance brokers and I forget precisely the point that you made, but you basically said, you know, a well intentioned piece of regulation was maybe having the effect of driving insurance brokers out of the market and therefore reducing the choice to a consumer who's becoming more and more dependent on comparison.
Where price is the main determinant, which then leads to massive churn, which is it's a pretty horrible model for everybody, it seems to me. I mean, no one is satisfied with the company providing the insurance has to build in the fact that, you know, the only thing people care about is price. Therefore, let's outsource everything. Let's. And you end up with something like airlines charging for, you know, everything. And everyone's pissed off because the overall experience is worse.
So how how do you see. The role of different bits of. Attempts to improve things over time through regulation. What do you think has worked and what do you think we should. You know, maybe you need to look again at from a regulatory point of view, because it's ended up not working in the way that one might have hoped.
Where price is the main determinant, which then leads to massive churn, which is it's a pretty horrible model for everybody, it seems to me. I mean, no one is satisfied with the company providing the insurance has to build in the fact that, you know, the only thing people care about is price. Therefore, let's outsource everything. Let's. And you end up with something like airlines charging for, you know, everything. And everyone's pissed off because the overall experience is worse.
So how how do you see. The role of different bits of. Attempts to improve things over time through regulation. What do you think has worked and what do you think we should. You know, maybe you need to look again at from a regulatory point of view, because it's ended up not working in the way that one might have hoped.
10:19
Speaker 2
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Speaker 2
Yes. I think the intention obviously, was to make things better. And clearly, you know, that's the case. I think some of the unintended consequences has been the increased cost for the broker community primarily. So, for example, having to get all the data from the insurers, which sometimes is hard to get there may be unwilling to provide it. It's all in different provided in different formats, measuring metrics and different ways. Um, which means when you're working with, say, 20 insurers, you've got to go to each of those for each of the products you sell.
That's a lot of work. Whereas maybe if it was put more on the insurer whose kind of most cases developing that product and then selling it through the broker, that may be easier for them to achieve. They have all that data internally already, largely. So I think that that that is probably one issue. Um, I think as well, there was maybe. So when the rules were introduced, it was deliberately left so that there was interpretation as to how you adopted it, how you reported on it, how you measured the different outcomes.
And I'm of the belief that maybe there should have been maybe a bit more of a prescribed process around that, but more of a framework. And it's something that we're doing at Insurance Data Lab is creating kind of ingesting all this different data and creating a framework where brokers can, for example, go and assess their insurer partners much easier by having that data all in one place. So we look at kind of claims outcomes, the complaints process, and also kind of solvency and underwriting. And we've made that more comparable across the businesses.
And I think that without that prescription, that's something that's missing. And I think the issue then has been that if you can't compare properly across the different companies, then it's hard to know who's good and who's bad to a degree. And then when you don't know who's performing best and worst, then hard for those poorer performers to see, they need to improve and to drive up standards. So I think that's been one of the issues. And I think that's something that could be addressed by having a framework in place, in place.
So people can essentially compare apples with apples and know where needs to be improved. And then if you see that affecting things like business placement through brokers, that's when maybe those insurers who have embraced it as well and might start to sit up and take a bit more notice.
That's a lot of work. Whereas maybe if it was put more on the insurer whose kind of most cases developing that product and then selling it through the broker, that may be easier for them to achieve. They have all that data internally already, largely. So I think that that that is probably one issue. Um, I think as well, there was maybe. So when the rules were introduced, it was deliberately left so that there was interpretation as to how you adopted it, how you reported on it, how you measured the different outcomes.
And I'm of the belief that maybe there should have been maybe a bit more of a prescribed process around that, but more of a framework. And it's something that we're doing at Insurance Data Lab is creating kind of ingesting all this different data and creating a framework where brokers can, for example, go and assess their insurer partners much easier by having that data all in one place. So we look at kind of claims outcomes, the complaints process, and also kind of solvency and underwriting. And we've made that more comparable across the businesses.
And I think that without that prescription, that's something that's missing. And I think the issue then has been that if you can't compare properly across the different companies, then it's hard to know who's good and who's bad to a degree. And then when you don't know who's performing best and worst, then hard for those poorer performers to see, they need to improve and to drive up standards. So I think that's been one of the issues. And I think that's something that could be addressed by having a framework in place, in place.
So people can essentially compare apples with apples and know where needs to be improved. And then if you see that affecting things like business placement through brokers, that's when maybe those insurers who have embraced it as well and might start to sit up and take a bit more notice.
10:21
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10:22
Speaker 7
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Speaker 7
Okay. And you're finally, if I may, your earlier. Point, which I think you've just touched on in your previous answer about um. It's there isn't. Readily available comparable data on claim. You know, performance in terms of dealing with claims. Um. You know, the percentage that are paid out and so on. What is preventing that information from being readily available?Because you would have thought perhaps from a market point of view, if you're an insurance company, part of your competitor, you know, you're competing in a.
Normal market, you're competing on price. You're also competing on service. And what I think you're saying really is that what has been happening is that the competition feels as though it's only really on price. So what's preventing them from saying X percent of all our claims are dealt with within and paid out because some of them do it?
Normal market, you're competing on price. You're also competing on service. And what I think you're saying really is that what has been happening is that the competition feels as though it's only really on price. So what's preventing them from saying X percent of all our claims are dealt with within and paid out because some of them do it?
10:23
Speaker 2
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Speaker 2
Yeah. So I think consumers are definitely more focused on price. I think brokers are more aware of the service element. Um, there is there is data available. So the regulator does publish things like claims acceptance rates. Um, you can get FCA complaints data as well. And then you can get data from the ombudsman. Not as much detail kind of publicly. I think the issue is it's all in different places.
It's all on different measures. And it takes a lot of time to go out and source it, compare it and draw your conclusions. A consumer is not going to do that. I don't think they're just going to go and see the price and pick maybe not the cheapest, but the cheapest from a brand that they've heard of. And if there's a well-known insurance company on their third place on the aggregators, they're probably going to go with that one. They may look at the de facto rating and see, you know, what level of cover it is, but they're not going to go out and go to the regulator's website for a different few different measures, and then go to the Ombudsman website and look at that.
And also some of the data isn't available. So the amount of time to settle a claim that is not readily available, it's not something that is needed to be reported on publicly. An insurer could decide to put that out there, but I haven't heard of any that do. I don't think. Um and then for brokers, again, it's they work with so many insurers. It's going out, finding that data and doing the comparison. It's a time issue, you know, there doing the regulation doesn't actually bring in any money.
I think that's the issue. Um it can help because if you're delivering a better service to your customer over the long run, it kind of will improve your business, but it doesn't bring it in, you know, through the door straight away. And I think that's the issue. And that's one of the reasons we do what we do is we bring that data together all in one place, and then we kind of sell it out to the industry. We've we've done the hard work for them type thing and yeah.
It's all on different measures. And it takes a lot of time to go out and source it, compare it and draw your conclusions. A consumer is not going to do that. I don't think they're just going to go and see the price and pick maybe not the cheapest, but the cheapest from a brand that they've heard of. And if there's a well-known insurance company on their third place on the aggregators, they're probably going to go with that one. They may look at the de facto rating and see, you know, what level of cover it is, but they're not going to go out and go to the regulator's website for a different few different measures, and then go to the Ombudsman website and look at that.
And also some of the data isn't available. So the amount of time to settle a claim that is not readily available, it's not something that is needed to be reported on publicly. An insurer could decide to put that out there, but I haven't heard of any that do. I don't think. Um and then for brokers, again, it's they work with so many insurers. It's going out, finding that data and doing the comparison. It's a time issue, you know, there doing the regulation doesn't actually bring in any money.
I think that's the issue. Um it can help because if you're delivering a better service to your customer over the long run, it kind of will improve your business, but it doesn't bring it in, you know, through the door straight away. And I think that's the issue. And that's one of the reasons we do what we do is we bring that data together all in one place, and then we kind of sell it out to the industry. We've we've done the hard work for them type thing and yeah.
10:26
10:26
10:26
Speaker 8
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Speaker 8
Yes. Continuing the theme of the role of regulation. The insurance market. We're here just looking at travel and house. Um, is. I think there's a fundamental problem because people think of it and it's public face is that it's just a commodity that you go along and buy. But ultimately, when you look at the two ends of the process, the. Um. The, the underwriting, ultimately the underwriting inevitably involved. And the other end, you've got the inevitability of loss adjusting or claims handling.
Um, and essentially both of those processes are more of an art than a science. Um, and continuing the theme of art, regulating art is an extremely difficult thing to do. You, you couldn't have regulation setting out what constitutes a good picture. So do. Do you follow the logic of. That that there's a fundamental problem with regulating the market.
Um, and essentially both of those processes are more of an art than a science. Um, and continuing the theme of art, regulating art is an extremely difficult thing to do. You, you couldn't have regulation setting out what constitutes a good picture. So do. Do you follow the logic of. That that there's a fundamental problem with regulating the market.
10:27
Speaker 2
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Speaker 2
I think that well, maybe, yeah, there is a bit of art to it. I think the outcomes are very measurable. Um, so you can see what, what's being delivered to customers. And I think focusing on that is the right thing to do, which is what the regulation is doing. Um, I think if you were going to start kind of prescribing how something was underwritten and how it was priced, I think that would create further issues. I know, um, in America that can happen and it is a bit of a nightmare from what I've heard.
Um, I think it very much does need to focus on the outcomes. I think the issue is maybe been, there have been issues that you can see in the data. Um, so claims acceptance rates, for example, in home insurance ranging from 63 to 74%. That's quite low. Motor insurance is 99%, for example. Now, it is true that a car insurance policy is much easier to kind of understand and know what is and isn't included than in a home or buildings policy.
But I think when you see I mean some buildings policies as low as 45% of some insurers claims accepted, maybe that there should have been a bit more of a focus on that from the regulator's point of view, and finding out why that was the case, and maybe some more enforcement based on the metrics that are being measured. I think that hasn't really happened yet. I know the FCA did a review into outsourced claims handling last year, and they said they fed back to some insurers that were involved in that.
But I don't think there's I haven't really seen much kind of actual action in terms of I don't think any policies have been withdrawn that I've heard of, for example, for not delivering value in those fair value assessments came in which maybe when you're seeing those low acceptance rates, you could maybe question that a bit and why they're still being sold. If maybe over half of claims are denied, particularly on something like a buildings policy. Um, so I would maybe question the enforcement of it. I think it's looking at the right things, but maybe not being used in the right way.
Um, another example is, um, that FCA review saw that only 32% of storm damage claims were actually resulted in a settlement. So I think it was, you know, 45, 46% denied and 19% of customers walked away, probably because, you know, either it was complicated or they realised that they weren't actually covered for what they were trying to claim for. And I think that's an issue. When you see figures like that, more needs to be done. I think primarily on the understanding of that policy by the consumer.
I think we see a lot of issues at the claim stage where they're declined. That is the most common cause of complaint is a claim being declined, particularly in home and travel. And I think that is. It's not because insurers are denying valid claims. I think a lot of the time it's because they're not covered. And I think that's an issue with how the policies are sold. And I think that's where you can be more clear and it is more scientific.
You can go. Out and assess how your policy wordings have been understood, how clear they are, how transparent they are, that kind of thing.
Um, I think it very much does need to focus on the outcomes. I think the issue is maybe been, there have been issues that you can see in the data. Um, so claims acceptance rates, for example, in home insurance ranging from 63 to 74%. That's quite low. Motor insurance is 99%, for example. Now, it is true that a car insurance policy is much easier to kind of understand and know what is and isn't included than in a home or buildings policy.
But I think when you see I mean some buildings policies as low as 45% of some insurers claims accepted, maybe that there should have been a bit more of a focus on that from the regulator's point of view, and finding out why that was the case, and maybe some more enforcement based on the metrics that are being measured. I think that hasn't really happened yet. I know the FCA did a review into outsourced claims handling last year, and they said they fed back to some insurers that were involved in that.
But I don't think there's I haven't really seen much kind of actual action in terms of I don't think any policies have been withdrawn that I've heard of, for example, for not delivering value in those fair value assessments came in which maybe when you're seeing those low acceptance rates, you could maybe question that a bit and why they're still being sold. If maybe over half of claims are denied, particularly on something like a buildings policy. Um, so I would maybe question the enforcement of it. I think it's looking at the right things, but maybe not being used in the right way.
Um, another example is, um, that FCA review saw that only 32% of storm damage claims were actually resulted in a settlement. So I think it was, you know, 45, 46% denied and 19% of customers walked away, probably because, you know, either it was complicated or they realised that they weren't actually covered for what they were trying to claim for. And I think that's an issue. When you see figures like that, more needs to be done. I think primarily on the understanding of that policy by the consumer.
I think we see a lot of issues at the claim stage where they're declined. That is the most common cause of complaint is a claim being declined, particularly in home and travel. And I think that is. It's not because insurers are denying valid claims. I think a lot of the time it's because they're not covered. And I think that's an issue with how the policies are sold. And I think that's where you can be more clear and it is more scientific.
You can go. Out and assess how your policy wordings have been understood, how clear they are, how transparent they are, that kind of thing.
10:31
Speaker 8
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Speaker 8
Okay, I get I get the importance of outcomes. The the question though becomes what's the role of regulations in determining what the outcomes are?Now we've got regulations at the moment. Is, is it more that we don't have the right regulations that creates dissatisfaction in some markets, or is it that the regulations are there and they're not being enforced?
10:31
10:32
10:32
10:32
Speaker 2
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Speaker 2
I know that when they did the review last year, they said sorry in response to the which super complaint that they are looking at the issues raised in that um. In their ongoing consumer duty supervision, they have taken in a lot of data and it hasn't been in that long. So it could be that we will see that and have another issues. Um, the total loss issue that the regulator has been looking at premium finance, that kind of thing. I wouldn't be surprised if we saw something down the line.
So I'm not saying that maybe the regulator is is not doing the right job. It just could be that it's coming down the line. Yeah.
So I'm not saying that maybe the regulator is is not doing the right job. It just could be that it's coming down the line. Yeah.
10:33
10:33
10:33
Speaker 6
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Speaker 6
Um, I'm looking at the chart I think you have sent to us about um uphold rates. Now if they're going up, that sounds like a good thing. It may actually disguise some dysfunctional behavior. Now first of all, can you define when you talk about an acceptance rate, you apply and they pay out your money. That's an acceptance. Then they refuse you. You go to the Ombudsman, the Ombudsman reprieves you. And so they are paying first time round acceptance rates and then the acceptance which they have to do because they're upheld.
When you use acceptance, is it the total of the two or is it just the first?
When you use acceptance, is it the total of the two or is it just the first?
10:34
Speaker 2
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Speaker 2
Honest answer is I'm not sure. I believe it's it covers both. So if the claim has been accepted finally, then my understanding it would be covered under that. So 40% for example of of both the upheld rate is when the ombudsman finds in favour of the customer. And it's not necessarily about claims. Claims are the majority. I think it's around 80% in home and travel. Um but there are other things as well.
And it's just when the ombudsman finds in favour of the customer and against the insurer and the decision they made on whatever the complaint was, not necessarily the claim. And it could be that the complaints upheld, but the claim might not be paid in full, for example, and which kind of makes it a bit more of a grey area. So there are there are different things. And, um, a high upheld rate shows that the insurers, the ombudsman said that the insurers made the wrong decision.
The high rate.
And it's just when the ombudsman finds in favour of the customer and against the insurer and the decision they made on whatever the complaint was, not necessarily the claim. And it could be that the complaints upheld, but the claim might not be paid in full, for example, and which kind of makes it a bit more of a grey area. So there are there are different things. And, um, a high upheld rate shows that the insurers, the ombudsman said that the insurers made the wrong decision.
The high rate.
10:35
10:35
Speaker 2
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Speaker 2
It could do. I don't believe it's widespread. Um, I don't there is a perception that insurers want to deny claims, you know, speak to people on the street. And they generally think that's what insurers are there to do, refuse claims. I don't think that's the case. Um, every time a case goes to the ombudsman, for example, it costs them more money. As a claim drags on. It costs them more. And just the operational cost of, you know.
Call centres handling that claim, that kind of thing. Um, but there is an issue that claims are being denied. I don't think it's the majority of the time that it's valid claims. I think a lot of the time it is that lack of understanding. I know it might sound a bit like a beating drum, but I think that insurers do want to play valid claims. Some there will be some that don't, and some may be have a threshold where they they are maybe a bit more, you know, trying to reject them, but I don't think that's a common common case.
Call centres handling that claim, that kind of thing. Um, but there is an issue that claims are being denied. I don't think it's the majority of the time that it's valid claims. I think a lot of the time it is that lack of understanding. I know it might sound a bit like a beating drum, but I think that insurers do want to play valid claims. Some there will be some that don't, and some may be have a threshold where they they are maybe a bit more, you know, trying to reject them, but I don't think that's a common common case.
10:37
Speaker 6
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Speaker 6
I'm just taking the analogy of um, if my borough you charged with going through an LTN closed street, you complain they will never accept the complaint. They'll just say, take it to the tribunal. Um, and let the tribunal sort this out. And that could be a valid commercial model. I mean, not not a nice commercial model, but I think you're saying you can't really prove whether that people have consciously chosen to be a bit tougher on claims than they used to be.
10:37
Speaker 2
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Speaker 2
Um, yeah, it's not something that I could say conclusively either way, to be honest. Um, I would say that claims acceptance rates are low in the home and travel markets in particular. Um, they, they have kind of gone down a bit or up a bit in some markets. It's not a marked change in recent years that I'd say they've got a lot worse. So I don't think it's in response to kind of the financial conditions that are in at the moment or anything like that.
Um, so I don't think I've seen a step change like that, but there could be some players doing that. Yeah.
Um, so I don't think I've seen a step change like that, but there could be some players doing that. Yeah.
10:38
Speaker 6
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Speaker 6
You point out that one of the problems may be that people have a poor understanding of what exactly they are buying when they buy it. They they may look at these terms and so on. Then you get to the renewal. Then you get a letter which says, we've reviewed our policies and we're making these changes, these changes, these changes. No idea really whether that is to your advantage or to their advantage. And I think they could slip through all sorts of things.
We used to play this, but we're not going to do so anymore. Not many people would spot it. So I think the, the. Has got to be really on the ball to see what is actually happening and is the treatment at renewal as good as it was when you bought the policy for the first time?
We used to play this, but we're not going to do so anymore. Not many people would spot it. So I think the, the. Has got to be really on the ball to see what is actually happening and is the treatment at renewal as good as it was when you bought the policy for the first time?
10:39
Speaker 2
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Speaker 2
I think we see. In the home market particularly, we see if you haven't had a claim, then a lot of the times, if the price seems fair, then you will renew. There may be changes to the terms. I think the claims experience changes things. If you've made a claim and had a good experience, then probably more likely to stay even if your premium goes off a bit because of that claim. Whereas if it's a bad experience, obviously you're probably going to look elsewhere.
So I was speaking to someone the other day, for example, they had a flood in their house and um, they phoned up to make a claim and they were asking about it. They were looking through their policy documents and they were seeing for escape of water, the the excess was £500 rather than the £350 excess they'd kind of bought with the policy, which is pretty standard. And they were aware of that and they were fine with that. But what they didn't know was that that excess excess applied to every single room in the house that was affected by the flood.
So there are four rooms. That's an excess then of £2,000. It cost them less than that to put it right himself. So he didn't make a claim. He's already decided he's not going to that insurer again. Now under the terms of the policy that's what the rules are. But he wasn't aware of that. And there may be an argument whether that's fair or not. He bought it. That's what he bought.
So the insurer would argue he should have been aware of it. But maybe because of that lack of understanding, it obviously wasn't made clear enough for him. Other people may have known, but I think there are issues like that where you people don't know what they're buying. And I think that's a real issue.
So I was speaking to someone the other day, for example, they had a flood in their house and um, they phoned up to make a claim and they were asking about it. They were looking through their policy documents and they were seeing for escape of water, the the excess was £500 rather than the £350 excess they'd kind of bought with the policy, which is pretty standard. And they were aware of that and they were fine with that. But what they didn't know was that that excess excess applied to every single room in the house that was affected by the flood.
So there are four rooms. That's an excess then of £2,000. It cost them less than that to put it right himself. So he didn't make a claim. He's already decided he's not going to that insurer again. Now under the terms of the policy that's what the rules are. But he wasn't aware of that. And there may be an argument whether that's fair or not. He bought it. That's what he bought.
So the insurer would argue he should have been aware of it. But maybe because of that lack of understanding, it obviously wasn't made clear enough for him. Other people may have known, but I think there are issues like that where you people don't know what they're buying. And I think that's a real issue.
10:41
Speaker 6
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Speaker 6
I think, although it's not I'm not sure it's really within our terms of reference. I think there is another abuse going on which is at renewal. You buy a policy and then next year they say it's gone up by 20%. And I say my income has gone up by 4%. Um, and you haggle with them and they bring it back down. Are they treating. Is that behaviour consistent with treating customers with respect and integrity and so on?If basically the renewal premium is a try on and they see who just buys it and they see who resists it, because I find a lot of cases.
I keep dodging. After about 2 or 3 years, I change to someone else, and then that pattern repeats itself, and I go back possibly to the first one.
I keep dodging. After about 2 or 3 years, I change to someone else, and then that pattern repeats itself, and I go back possibly to the first one.
10:42
Speaker 2
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Speaker 2
So there used to be the case where, um, maybe more in the motor market predominantly, but in your home as well, where um, kind of new customer prices were a lot cheaper than renewals, just as standard. And that the idea was that you'd bring in that new customer and then you'd put up the premiums at renewal, almost like a loss leader in that first year. And then after that, you'd get your money back. But I can't remember what it was. But rules were introduced to stop that.
You can offer kind of different premiums now to for new business and renewals, but you still do get that, I suppose, negotiation at renewal with some providers, some, um, just flat refuse that. It's just that's the price. But you do get some providers where you can phone up and see if you can get a better deal. Um.
You can offer kind of different premiums now to for new business and renewals, but you still do get that, I suppose, negotiation at renewal with some providers, some, um, just flat refuse that. It's just that's the price. But you do get some providers where you can phone up and see if you can get a better deal. Um.
10:43
10:43
Speaker 2
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Speaker 2
So in those instances, I imagine that the new business would have been sold at the same price. That's what it should be. Um the other thing would be is if that policy being sold at renewal is no longer available, in which case then it's not available to new customers. So the pricing rules wouldn't apply because the same policy isn't being sold. So it could be there's been changes of terms that have been brought in for new policies. That means that the policy that's being renewed no longer exists.
New customers, for example.
New customers, for example.
10:44
Speaker 1
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Speaker 1
Eddie. Um, yes, I'm just sort of thinking about we've already discussed that checking. What's in and what's out and those kinds of things. Um, is important and, and has the focus on price and the use of, um, you know, websites for comparison meant that. It's all too much of a package. And so, you know, you tick the boxes and you get a price at the end or whatever, rather than there being a bit more interrogation so that the customer can appreciate that some of the add ons that look trivial are actually the things that are boosting the price quite a lot.
Um, and um. Certainly with the advent of, of AI, there must be much more opportunity to, to iterate round and the fact that, you know, maybe they've hiked up the contents insurance or everything's got a bit old and faded and you didn't need that then, um. I mean, how much is that looked at?Or is, has, has this sort of comparison and pricing squeezed out those kinds of, um, presentations?
Um, and um. Certainly with the advent of, of AI, there must be much more opportunity to, to iterate round and the fact that, you know, maybe they've hiked up the contents insurance or everything's got a bit old and faded and you didn't need that then, um. I mean, how much is that looked at?Or is, has, has this sort of comparison and pricing squeezed out those kinds of, um, presentations?
10:45
Speaker 2
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Speaker 2
Yes. I think that we, we have seen, um, I think, yeah, similarly, it does make an issue because it makes it all about the price. And I think some things that maybe you expect to be included are now an add on in order to get that initial price seem cheaper. And some things that a consumer might expect to be included as standard now isn't and needs to be bought as an extra part of the policy. You see that predominantly with like the value products, whereby it's the minimum level of cover that you can buy really.
Um, and it's at a much lower price. Um, you do have an underinsurance problem, for example, in the home insurance market where people don't know the rebuild value of their house, for example. So, and how can they be expected to. So that's not covered. The value of contents is often a lot higher than what people expect. So they're not buying enough cover there. And that's an issue. And I think again, for example, if your house burnt down and you didn't have enough cover, then they won't pay out the full amount.
They'll only pay out percentage based on what was covered by the policy, for example. And I think that that's an issue that you see in the market there has been driven by the price comparison websites. I do think they have helped and that it makes it a lot easier to buy a policy now. But I think probably more work needs to be done. On the understanding with the question sets, for example, there's been a lot of work done to reduce the number, and in some cases that's great if you can get the data from, you know, a previous login, for example, where you've shared details of your house, um, or if there's, you know, certain motor insurance, there's different data sets that they can plug into to get data around your driving history, for example.
That's great for reducing the, the question set. But I think when it comes to levels of cover, maybe that's been pared back a bit too much and more time needs to be taken, which makes it a bit more of a a longer journey for the consumer, but one that delivers more value and would ultimately deliver more outcomes. I would say the issue with that is most people don't make a claim on their policy every year. So you're making the experience worse from the majority.
But to deliver the value to those customers who actually use the products. And that's the, I suppose, the line that's got to be walked on. The balancing point there is finding the right the right level.
Um, and it's at a much lower price. Um, you do have an underinsurance problem, for example, in the home insurance market where people don't know the rebuild value of their house, for example. So, and how can they be expected to. So that's not covered. The value of contents is often a lot higher than what people expect. So they're not buying enough cover there. And that's an issue. And I think again, for example, if your house burnt down and you didn't have enough cover, then they won't pay out the full amount.
They'll only pay out percentage based on what was covered by the policy, for example. And I think that that's an issue that you see in the market there has been driven by the price comparison websites. I do think they have helped and that it makes it a lot easier to buy a policy now. But I think probably more work needs to be done. On the understanding with the question sets, for example, there's been a lot of work done to reduce the number, and in some cases that's great if you can get the data from, you know, a previous login, for example, where you've shared details of your house, um, or if there's, you know, certain motor insurance, there's different data sets that they can plug into to get data around your driving history, for example.
That's great for reducing the, the question set. But I think when it comes to levels of cover, maybe that's been pared back a bit too much and more time needs to be taken, which makes it a bit more of a a longer journey for the consumer, but one that delivers more value and would ultimately deliver more outcomes. I would say the issue with that is most people don't make a claim on their policy every year. So you're making the experience worse from the majority.
But to deliver the value to those customers who actually use the products. And that's the, I suppose, the line that's got to be walked on. The balancing point there is finding the right the right level.
10:47
Speaker 1
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Speaker 1
Right. So and I mean, let's switch over to travel insurance as a change. Um, I mean, is that adequately subdivided if you because of course, if you're going on holiday, your, your, your travel company is going to say, if you're going abroad, you know, you want to see that you've got travel insurance. Um, so everybody sort of starts looking at that quite early on. Um, but a big part of the cost is actually cancellation insurance and, and is the consumer aware of that?Um, especially if they've got medical conditions and things that, that the cost, if you take the insurance out close to your departure date may well be a whole lot cheaper than if you take it out.
When you first thought about booking and, um, I don't recall that ever being flagged up. Um, anywhere.
When you first thought about booking and, um, I don't recall that ever being flagged up. Um, anywhere.
10:48
Speaker 2
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Speaker 2
Yes. So, um, I think with people with kind of pre-existing medical conditions, I think a lot of the standard products understandably aren't right for them. So they're more likely to go through a broker who understands the process a bit more and can help them with that. It's very specialist providers who cover that. Um, there maybe is an issue still though with consumer understanding. So I've heard of cases whereby, for example, someone has had a pre-existing cancer diagnosis. That's they're in remission.
It's, um, they've been given the all clear and they're covered to travel for anything related to that. If there was a recurrence or a related illness, and then they go between taking up the insurance and going on holiday, they um, are called to the doctor for a test. And then they phone up their broker to tell them, the broker says, okay, we have to take that condition off cover now. And then if you go on holiday, you won't be able to make a claim because of that.
But we can, you know, if you were to cancel because of it, you would be covered. And I think there's issues there that maybe there's not understanding how the policy works in terms of that. I think cancellation covers important. Um, you know, you could fall ill or injured in the UK before you go abroad. There's a longer period of time. It's probably more likely occurrence that that would happen. So I think it's an important part of it.
And I can maybe understand why it is a bit more expensive. I think some of the large costs with um. Overseas claims around kind of overseas medical costs or repatriation, they can be huge. Um but rare. So I think that's baked into the price as well. But I think again, people need to understand how these policies work. And I think it's probably not, it's probably fair to say they don't always understand it, particularly in those fringe cases, which maybe makes broker advice more important.
For example.
It's, um, they've been given the all clear and they're covered to travel for anything related to that. If there was a recurrence or a related illness, and then they go between taking up the insurance and going on holiday, they um, are called to the doctor for a test. And then they phone up their broker to tell them, the broker says, okay, we have to take that condition off cover now. And then if you go on holiday, you won't be able to make a claim because of that.
But we can, you know, if you were to cancel because of it, you would be covered. And I think there's issues there that maybe there's not understanding how the policy works in terms of that. I think cancellation covers important. Um, you know, you could fall ill or injured in the UK before you go abroad. There's a longer period of time. It's probably more likely occurrence that that would happen. So I think it's an important part of it.
And I can maybe understand why it is a bit more expensive. I think some of the large costs with um. Overseas claims around kind of overseas medical costs or repatriation, they can be huge. Um but rare. So I think that's baked into the price as well. But I think again, people need to understand how these policies work. And I think it's probably not, it's probably fair to say they don't always understand it, particularly in those fringe cases, which maybe makes broker advice more important.
For example.
10:51
Speaker 1
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Speaker 1
I mean, I do remember doing some calculations once and worked out that the the quote for the insurance was higher than the cost of hiring an air. To get home. So I didn't take it out. Um, so yeah, I mean, I just think that, you know, it isn't flagged at all. And some people are not necessarily recognising take out the medical conditions thing. Just, just how much is the cancellation cost versus the travel cover cost?And, um, you know, there should be, I think a bit more clarity around that because people are probably paying more than they need in some instances, because they could, um, you know, delay their booking or something.
10:51
10:52
Speaker 9
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Speaker 9
Okay. First I declare an interest as a non-executive director of Unity Trust Bank. Um, if I'm interested in. Let's take it from the view of the insurance company for a moment. I want to price a policy. So I look at the probability of claims. Which is I get from historical data. I then take out a section which would be fraud, which was also from historical data. And I then put in my refusal rate.
Okay. And then I can price the policy. So the refusal rate is part of the business model. Would you agree?
Okay. And then I can price the policy. So the refusal rate is part of the business model. Would you agree?
10:53
Speaker 2
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Speaker 2
I'll be honest and say I, I don't know the intricacies of pricing and policy. Um, I wasn't aware that a refusal rate was built into that. I would have thought if the claim was valid, then that would have been assumed to have been paid. So I wouldn't like to comment if something that's taking place, I wouldn't know.
10:53
Speaker 9
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Speaker 9
Okay. Thank you. The other thing I've been puzzling about motor insurance where everybody says, oh, it's 99% acceptance and so on and so forth. Now, the peculiarity of motor insurance is that many of the terms are enforced by law. You are required by law to have these particular terms. And therefore you have a particularly strict form of regulation, which is resulting in a 99% acceptance rate. And or is associated with not resulting in resulting in going too far is associated with the 99% acceptance rate.
So perhaps the problem with insurance general generally is that it's under regulated compared in terms of household and travel and so on, compared to motor insurance, which is very tightly regulated in several of its characteristics. Not all, of course, but several of its characteristics. Does that is that a credible story?Do you think.
So perhaps the problem with insurance general generally is that it's under regulated compared in terms of household and travel and so on, compared to motor insurance, which is very tightly regulated in several of its characteristics. Not all, of course, but several of its characteristics. Does that is that a credible story?Do you think.
10:54
Speaker 2
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Speaker 2
I'd probably say it's more to do with the complexities of the risk. So if you compare home kind of buildings insurance, for example, there's probably one of the conditions of a policy generally is that you have to maintain, for example, the state of your roof if your roof is blown off and it was maintained, then it's covered. If it wasn't maintained, then it's not. That's a pretty standard term in car insurance. I wouldn't say you have that similar type of instance.
10:55
10:55
Speaker 2
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Speaker 2
Well, that's, that's the gray area I suppose. And I think that that's where the issue lies in that market is that there are instances where someone will think they're covered and the insurer would say they're not, because maybe their roof is in a poor state of repair, and that there may have been an issue there already, um, how they get to that, I don't know, I'll be honest. Whereas with the car, if you've crashed your car, it's pretty obvious you've crashed your car. Um, it's a bit less clear.
And then you also have things where there's an exclusion. So storm damage, as I was saying earlier, of that 32%, that's a big one. People think it's covered and it's not. So if you're going to make a claim the insurer could deny it because for a valid reason, you're not covered under your policy. That's reported as a denied claim in car insurance. I mean, leaving your keys in the ignition, someone stealing it would be one example where you're probably not covered.
In other instances, there's less. I suppose instances where I'm, I can think of other examples where that may, may be something where you're not covered, where they're much more apparent in, um, in home and contents contents insurance, often accidental damage is an additional buy on that people may add on that people may think they have when they don't. Um, laptops are often excluded if they're over a certain amount of value. High value products can often be excluded under typical policy. So there's much more caveats and exclusions that come under that.
Also the FCA picked up, you know, what defines a storm. That can be something as well that that comes into a policy for storm damage. And I think there's more, um, areas for discussion about what is and isn't covered under those policies. So I don't think it's a case of more regulation would sort that. Um, unless you get into the minutiae of different, you know, legislating what the definitions are, which I think would be too restrictive. So I think it's more a difference in the type of risk being covered rather than the level of regulation.
And then you also have things where there's an exclusion. So storm damage, as I was saying earlier, of that 32%, that's a big one. People think it's covered and it's not. So if you're going to make a claim the insurer could deny it because for a valid reason, you're not covered under your policy. That's reported as a denied claim in car insurance. I mean, leaving your keys in the ignition, someone stealing it would be one example where you're probably not covered.
In other instances, there's less. I suppose instances where I'm, I can think of other examples where that may, may be something where you're not covered, where they're much more apparent in, um, in home and contents contents insurance, often accidental damage is an additional buy on that people may add on that people may think they have when they don't. Um, laptops are often excluded if they're over a certain amount of value. High value products can often be excluded under typical policy. So there's much more caveats and exclusions that come under that.
Also the FCA picked up, you know, what defines a storm. That can be something as well that that comes into a policy for storm damage. And I think there's more, um, areas for discussion about what is and isn't covered under those policies. So I don't think it's a case of more regulation would sort that. Um, unless you get into the minutiae of different, you know, legislating what the definitions are, which I think would be too restrictive. So I think it's more a difference in the type of risk being covered rather than the level of regulation.
10:57
10:57
Speaker 4
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Speaker 4
Colic. You've said on a number of occasions that um. The customer needs to understand. And to be able to have enough information to make an informed decision. So the point of. Taking an insurance policy out is largely driven. You have made the point by cost. Is there a requirement to provide a minimum of information about what is covered?What is not covered, or because it would appear from your comments that it's only when somebody makes a claim that the full cover or non lack of cover becomes apparent.
10:58
10:58
10:59
Speaker 2
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Speaker 2
Yeah. And I think I think that's the issue with the work that's gone into speeding up the process. There's, there could should be certain instances within the quote journey where those exclusions are made clear rather than read these key documents or terms and conditions, where it's, where it's, um, disclosed what is and isn't covered. I would argue that it would be much better for everyone if there was. This is covered. This isn't covered. Just very clear.
Before you go and buy on the web page instead of in the documents themselves.
Before you go and buy on the web page instead of in the documents themselves.
11:00
11:00
11:00
11:00
Speaker 2
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Speaker 2
I wouldn't say that's probably a commonplace, um, term. It's something I've heard of. Um and I think that's why there is the perception issue of the industry. People saying they're trying to deny claims because something like that made that there's no point in that person making a claim because it would cost him more than the cost of repair is less than the excess.
11:00
Speaker 4
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Speaker 4
So we need more information on the front page. And that information should also include claim acceptance rates, but also the speed of expectations. Because it seems to me, one of the challenges that insurance the insured has is they. Has happened. They need money quite quickly to pay for it. Therefore, the pressure is on to settle. Whereas the speed of settlement can be very prolonged. And is it not the case that most insurance companies.
Now in fact, outsource claims?And so you get into a long journey with people trailing different parts of the world on call centres to find out what's going on, what's not going on. So the information about how much, what the claim acceptance rate is, and the time to settle is, again, critical information.
Now in fact, outsource claims?And so you get into a long journey with people trailing different parts of the world on call centres to find out what's going on, what's not going on. So the information about how much, what the claim acceptance rate is, and the time to settle is, again, critical information.
11:02
Speaker 2
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Speaker 2
Yeah, I'd agree with that wholeheartedly. I think that should be something that consumers should be aware of. Um, and I think particularly in the buildings insurance, those delays are a real issue. Um, so, um, kind of across home and travel, it's 18% of ombudsman complaints are about delays to a claim. And that's not just claims complaints. That's all complaints in buildings insurance. Those delays are 23%. It's more than double kind of contents insurance and travel.
I think that's a big issue.
I think that's a big issue.
11:02
Speaker 4
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Speaker 4
I made the point that the law, um, actually deals with a lot of what has to be covered for motor insurance. It would seem to me a similar Be covered for motor insurance. It would seem to me a similar arrangement exists with a lot of houses, because the provider of mortgage finance, which has a keen interest to know what is covered and what is not going do. Mortgage suppliers, providers require a. To see the insurance cover what is covered, what is not, because that presumably goes to the heart of whether the value of their mortgage is, is, is is whole or not.
11:03
Speaker 2
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Speaker 2
I believe there is a requirement to have buildings insurance cover the cost of rebuilding the property. If it was burnt down, for example. But I've never heard of that being required to be shown to the mortgage provider. No. And whether I'd imagine that in a lot of cases, properties are underinsured because people often underestimate what it would cost to rebuild the policy, particularly with, um, you know, price of labour and materials having gone up so much lately. So I think that probably is a big issue.
Um, I think there are, I could be wrong, but I think there is legislation around minimum, minimum levels of kind of liability cover. For example, under some home insurance policies, but I wouldn't know for sure. But I don't think there is around rebuild that kind of thing.
Um, I think there are, I could be wrong, but I think there is legislation around minimum, minimum levels of kind of liability cover. For example, under some home insurance policies, but I wouldn't know for sure. But I don't think there is around rebuild that kind of thing.
11:04
Speaker 8
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Speaker 8
Can I just follow up on that point?Because we've been. The questions compared motor with housing, for example. A big factor in the motor insurance is the no claims discount. But you don't get that in housing, I don't think um. So what impact does that have on claims rates?I know I've more than once had a valid claim, but I don't pursue it because I don't want to lose my no claim discount.
11:04
Speaker 2
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Speaker 2
Yes. So technically, even if you don't claim if you have an accident, you should say to the insurer. But um, yeah, I think in home insurance, the impact of historic claims is less than in motor. If you're having frequent car accidents, you probably means that you're more likely to have one in the future. It's less marked in, in home insurance, my understanding, which is why there's not the no claims discount. Um, but I could be wrong on that.
But I think that's why it's introduced in motor insurance and rather than the other markets. Sharkey.
But I think that's why it's introduced in motor insurance and rather than the other markets. Sharkey.
11:05
11:05
11:05
11:06
Speaker 2
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Speaker 2
That's the tricky question. I'd say there has been minimal improvements as a result of it. I spoke about the claims acceptance rates earlier, and I think improved slightly in some markets, but got worse in others. So it would question what impact that's had. I think it has helped the industry focus on it more. And I think the insurers that are. Embracing the the culture behind it and embedding it in the organisation have improved. Um, and you do see some improvements in those markets in terms of the claims acceptance rates.
On the other hand, you do see rates going down for some providers in all markets. So for example, if you take those claims acceptance rates, there's a big variation um in the market. So for example in home insurance buildings, you see claims acceptance rates between 45% and 85% across different providers. In content insurance, it's 60 to 90. Um, for combined policies, 55 to 100. And then in travel insurance, again, 55 to 100%. So you do see insurers have very high upheld rates that are in line with, you know, other lines such as motor insurance.
I think the issue is at the other end of the market, where you have those providers who are denying such a large level of claims. Um, I think I don't know, but I would my gut feel would be that the providers that maybe haven't engaged with the regulations as much and maybe have seen it more of a tick box exercise where they're reporting on it, but aren't necessarily looking into the. Issues. That would probably be my guess. Um, in terms of what to do about it, I think, I think we will see from the regulator more action coming down the line.
I know in response to the which super complaint they were saying they were dealing with those issues as part of their ongoing oversight. And I think we'll see something on that at some point. I would be very surprised if we didn't. And I think the issue is there needs to be enforcement action for changes to be made. I think that's when you'll start to see those changes from those poor performers. I think a lot of people have improved, but there's some dragging down the market.
On the other hand, you do see rates going down for some providers in all markets. So for example, if you take those claims acceptance rates, there's a big variation um in the market. So for example in home insurance buildings, you see claims acceptance rates between 45% and 85% across different providers. In content insurance, it's 60 to 90. Um, for combined policies, 55 to 100. And then in travel insurance, again, 55 to 100%. So you do see insurers have very high upheld rates that are in line with, you know, other lines such as motor insurance.
I think the issue is at the other end of the market, where you have those providers who are denying such a large level of claims. Um, I think I don't know, but I would my gut feel would be that the providers that maybe haven't engaged with the regulations as much and maybe have seen it more of a tick box exercise where they're reporting on it, but aren't necessarily looking into the. Issues. That would probably be my guess. Um, in terms of what to do about it, I think, I think we will see from the regulator more action coming down the line.
I know in response to the which super complaint they were saying they were dealing with those issues as part of their ongoing oversight. And I think we'll see something on that at some point. I would be very surprised if we didn't. And I think the issue is there needs to be enforcement action for changes to be made. I think that's when you'll start to see those changes from those poor performers. I think a lot of people have improved, but there's some dragging down the market.
11:08
11:08
11:09
Speaker 2
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Speaker 2
I think again, it comes down to the, a lot of it is down to buildings claims. Um, and I think the issue is there around again, I know I'm saying it again, but the understanding people just don't know what is and isn't covered. And I think it's on the industry to make that clearer and improve that. I think that is a large issue. Lots of things that you maybe, maybe consumer would expect to be covered under a policy as. It isn't under a lot of the policies that are available.
I think that's the issue. Okay.
I think that's the issue. Okay.
11:09
11:10
11:10
Speaker 7
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Speaker 7
Could you just say something briefly on. The role that outsourcing of claims management you think has had. Because you would guess, I don't know, perhaps you do that the kind of contractual relationship that the insurer might have with the claims manager. Would probably have performance targets around, you know, volume of payouts. Speed what have you what how does that all work?
11:10
Speaker 2
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Speaker 2
So I think it's often very convoluted chain. So you have lots of different people involved. That makes the management hard. And the FCA review they did last year said there were issues with oversight and a lack of information coming from those third party providers to the insurer, and maybe there should be a closer eye being kept on how they are performing. I think a lot of the issue comes down to communication, buildings, insurance. For example, if you have a repair to a house, it can be quite a long process.
Delays are inevitably going to happen if jobs overrun, further issues are discovered. I think a lot of the issues come from a lack of communication from the insurer, and that probably stems because there are so many people in the chain. Um, there are benefits to, I suppose, outsourcing it to professionals who, you know, they have the economies of scale, they have the experts in place instead of an insurer, particularly the smaller ones, keeping them on hand themselves. I think the issue is around the oversight and the complexity of those supply chains probably come more to the fore in recent years, with the issues we've seen around labour shortages and the increased cost of parts can make claims more complex and more hard to manage.
Um, but I think what the FCA was saying there should have been better oversight in some circumstances.
Delays are inevitably going to happen if jobs overrun, further issues are discovered. I think a lot of the issues come from a lack of communication from the insurer, and that probably stems because there are so many people in the chain. Um, there are benefits to, I suppose, outsourcing it to professionals who, you know, they have the economies of scale, they have the experts in place instead of an insurer, particularly the smaller ones, keeping them on hand themselves. I think the issue is around the oversight and the complexity of those supply chains probably come more to the fore in recent years, with the issues we've seen around labour shortages and the increased cost of parts can make claims more complex and more hard to manage.
Um, but I think what the FCA was saying there should have been better oversight in some circumstances.
11:11
11:12
11:12
11:12
11:12
Speaker 5
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Speaker 5
Yes. Can I ask?It's now three years since a consumer duty was introduced. And I just wonder if you have any evidence. I mean, some chief executives might have said we're going to do a thorough review of our business and see if we can't improve it in line with it. Demands of the consumer duty. Others may have said, you know, unless it's going to be regulation, frankly, this is just more noise from the regulators. And I just wonder, do you have any evidence at all of the scale of different responses?
11:13
11:13
Speaker 5
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Speaker 5
Well, I mean, to what extent have you found companies saying, yes, we're going to take the consumer duties seriously?And we, the way we do our business, the way we treat customers, the way we produce information and so on, we're doing a thorough, you know, three. 60 degree review. What are we doing?Other companies may say this is just more sort of garbage from the regulators. And frankly, we can pass. I mean, we. Do you have any evidence of the response.
11:14
Speaker 2
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Speaker 2
Not really. I mean, anecdotally, the majority of the insurers I'd spoken to say they're embracing the, um, the regulations and have put things in place to help with the monitoring and reporting. There will be players who do see it more as a headache rather than a benefit, but I think the majority are embracing it and or at least saying they I think there may be from from what we've seen, there are certain players who are pulling down the market, the averages and the positions in different markets.
Um, I think the majority have embraced it and we have seen some improvements. I just think it's the it's the poor performers that are maybe disproportionately affecting outcomes a bit. Thank you.
Um, I think the majority have embraced it and we have seen some improvements. I just think it's the it's the poor performers that are maybe disproportionately affecting outcomes a bit. Thank you.
11:14
Speaker 10
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Speaker 10
All right. Before I draw this session to a close, I omitted to declare my interest at the beginning, having exhausted my colleagues to do so earlier. I then forgot my own. I have shares in listed financial services companies, including insurers, as recorded in the Register of Interests. Uh, with that, um, Mr. Scott, I'd like to thank you very much for this evidence session. It's full of fascinating insights, and I thank you very much for taking the time to come and talk to us today.
11:15
11:15
Speaker 10
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Speaker 10
Welcome to the second part of today's meeting, which is the second oral evidence session as part of the committee's inquiry into the regulation of the consumer insurance market. And I thank you very much to Mr. Bruce for attending. The session is open to the public. It's broadcast and is subsequently available, available via the parliamentary website. A verbatim transcript will be taken of the evidence and will be put onto the parliamentary website. So, Mr. Bruce, if you could just, um, welcome very, very much to the session, if you could just explain your background and then we'll then we'll move on to questions.
11:16
Speaker 12
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Speaker 12
Thank you for having me. Yes. Matthew. Bruce, uh, for the last six months, I've been a partner in risk and regulation at KPMG. Prior to that, for five years, I was director of insurance at the FCA. So responsible for the supervision of 6000 or so insurers and brokers operating in the UK. And prior to that, I spent 15 years at the Bank of England and five years as Andrew Bailey as chief of staff when he was head of the FCA.
11:16
Speaker 10
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Speaker 10
Um. Thank you. So you bring a very special perspective to our inquiry. I think what I'd like to do is, is invite you to give us an overview of how regulation fits into the, the various players in the insurance sectors that we're looking at, which is home and insurance. And so the insurers and other players, including brokers and other intermediaries.
11:17
11:17
Speaker 12
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Speaker 12
So insurers are regulated by both the Bank of England through the PRA and the FCA in terms of conduct of business, brokers are solely regulated for prudential and conduct reasons. Um by the by the FCA. And so all of that is set out initially in Fisma. Uh, and that's the basis for all financial services regulation in the UK. We didn't have the various sourcebooks. Uh, so Acbs is the main insurance one, uh, that sets the rules as to how insurers should operate.
And then the consumer duty, which is the, as was talked about in the last session, the main powers and principles for regulation sits on top of that. Uh, and it's through that, that, uh, my, my old team would regulate the insurance sector, um, through all parts of the process. So from understanding the price and value for the products that were sold, what was sold, uh, how customers were supported and how they understood the products that were, that were sold. Elsewhere within the FCA would be the enforcement area.
So, uh, there would be a various elements of how firms are supervised, but where things, uh, go very wrong. Enforcement is where it is. The final part of that, where, uh, the powers that the FCA would have to, to investigate.
And then the consumer duty, which is the, as was talked about in the last session, the main powers and principles for regulation sits on top of that. Uh, and it's through that, that, uh, my, my old team would regulate the insurance sector, um, through all parts of the process. So from understanding the price and value for the products that were sold, what was sold, uh, how customers were supported and how they understood the products that were, that were sold. Elsewhere within the FCA would be the enforcement area.
So, uh, there would be a various elements of how firms are supervised, but where things, uh, go very wrong. Enforcement is where it is. The final part of that, where, uh, the powers that the FCA would have to, to investigate.
11:18
11:18
11:18
11:18
Speaker 12
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Speaker 12
So as I mentioned, there is between 5 and 6000 firms, and the insurance area of the FCA is approximately 100 people. So that ranges from large multinational insurers. Who are regulated to individual insurance brokers operating from their own homes. So it's a vast range of firms that, uh, that the FDA is responsible for. So the supervision would focus on both looking at how, uh, those large firms operate their governance, their controls. Um, it would look at things such as their claims handling and areas that were arising, uh, and as well as that, for the vast majority of firms, uh, the supervision would work on a reactive basis.
So what that would mean is there would be information that would come from the financial Ombudsman to say, these are the types of complaints that we're getting. These are the firms where we're receiving the most complaints and frequently receive letters from, from, from you and from members of members of Parliament setting out their constituents concerns. There would be whistle blowers, lots of other kind of forms of information would come into the regulator, and all of those would be assessed and put together to build a picture of where the firms, where they were.
The biggest issues that need to be addressed, and supervisors would focus their time on understanding, um, what those firms. Are doing, where things were going wrong, where there needed to be interventions, at a firm level, and additionally where we saw issues happening across a number of firms at the same time or across a single product, there might be an intervention looking into that product as a whole. So to give an example from motor insurance, uh, three years. Ago. Uh, an issue arose where, um, the ombudsman started receiving a lot of complaints where people were saying, well, my car's been written off in an accident, and the payout I'm getting from insurer is insufficient for me to buy the same car again.
Uh, so my team at the time looked into that, uh, and understood that actually across many firms, they were using the, the, the guidebooks of what the kind of costs are for cars and were in most cases using cheaper or the cheapest version of those, as opposed to a kind of range and appropriate average across them. As a result of that, we wrote to all firms to do anything to stop that. This is the approach you should be using, uh, trying to stop the harm very quickly and then ask them to remediate, i.e.
look back over their records over the last few years and to repay all of those people who had been underpaid. They should be rebated, uh, for money that they should have received at the time. So the intention of all of that supervision is to say we have. Noticed a harm. Stop it. Look back and resolve those, resolve those issues. Um, and so you have this mixture of individual firm supervision and then issue supervision based on, uh.
So what that would mean is there would be information that would come from the financial Ombudsman to say, these are the types of complaints that we're getting. These are the firms where we're receiving the most complaints and frequently receive letters from, from, from you and from members of members of Parliament setting out their constituents concerns. There would be whistle blowers, lots of other kind of forms of information would come into the regulator, and all of those would be assessed and put together to build a picture of where the firms, where they were.
The biggest issues that need to be addressed, and supervisors would focus their time on understanding, um, what those firms. Are doing, where things were going wrong, where there needed to be interventions, at a firm level, and additionally where we saw issues happening across a number of firms at the same time or across a single product, there might be an intervention looking into that product as a whole. So to give an example from motor insurance, uh, three years. Ago. Uh, an issue arose where, um, the ombudsman started receiving a lot of complaints where people were saying, well, my car's been written off in an accident, and the payout I'm getting from insurer is insufficient for me to buy the same car again.
Uh, so my team at the time looked into that, uh, and understood that actually across many firms, they were using the, the, the guidebooks of what the kind of costs are for cars and were in most cases using cheaper or the cheapest version of those, as opposed to a kind of range and appropriate average across them. As a result of that, we wrote to all firms to do anything to stop that. This is the approach you should be using, uh, trying to stop the harm very quickly and then ask them to remediate, i.e.
look back over their records over the last few years and to repay all of those people who had been underpaid. They should be rebated, uh, for money that they should have received at the time. So the intention of all of that supervision is to say we have. Noticed a harm. Stop it. Look back and resolve those, resolve those issues. Um, and so you have this mixture of individual firm supervision and then issue supervision based on, uh.
11:21
11:21
Speaker 12
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Speaker 12
I think that is a debate that is always had as to what is the appropriate size of a regulator, how much is necessary. And in my mind, uh, you know, it never felt like it was enough people to, to look at those. But, but equally, there is a cost to regulation. Um, and trying to right size, whether it is a very difficult thing to do. Um, I think I'm proud of the actions that were taken by my team over the time I worked at the FCA to look at some very significant issues that arose from that.
The price of multiple occupancy building insurance after the Grenfell tragedy, uh, to business interruption insurance during the during Covid that resulted in over £2 billion being paid out, uh, to, to small businesses that otherwise wouldn't have been, uh, I feel there was always sufficient resource to focus on the issues that mattered. Did that mean we covered everything that needed to be looked at?There's always a risk based decision that needs to be made as to how to focus. Um, the resource that was had.
The price of multiple occupancy building insurance after the Grenfell tragedy, uh, to business interruption insurance during the during Covid that resulted in over £2 billion being paid out, uh, to, to small businesses that otherwise wouldn't have been, uh, I feel there was always sufficient resource to focus on the issues that mattered. Did that mean we covered everything that needed to be looked at?There's always a risk based decision that needs to be made as to how to focus. Um, the resource that was had.
11:22
11:22
Speaker 12
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Speaker 12
Indeed. So last July, there was a publication from the FCA saying that looked into this issue, I think the few years prior to last year when when that came out, the focus of many of the consumer groups of parliamentarians of of my team was more on price. The price of products, and being able to ensure that people were able to buy products that they needed, especially during the cost of living crisis and in the aftermath of the pandemic. I mean, what what has changed over the last couple of years is a focus to the other end of the journey of, okay, I might have a product, it may be cheap or cheaper than it may have been previously, but does it provide for me when I come to come to need it?Um, and I think for products like motor, uh.
You there are, what we've had is a kind of hollowing out around some of the products. So you can get ones that pay out, uh, that either online only policies or bronze level or one ones that are kind of quite basic that go up to very fulsome products. Uh, and I think, uh, to kind of questions earlier, I think that's something that is kind of quite well understood by consumers as to what, what, what is, what is in those, I think customer understanding around home is one of the insurance.
It's one of the main issues that arose from the investigation that, um, my previous team carried out last year, the subsequent which received complaint building on that as well. Uh, and, uh, as previous evidence was given the focus around consumer understanding of what is covered and what isn't is a kind of crucial, uh. Part of that.
You there are, what we've had is a kind of hollowing out around some of the products. So you can get ones that pay out, uh, that either online only policies or bronze level or one ones that are kind of quite basic that go up to very fulsome products. Uh, and I think, uh, to kind of questions earlier, I think that's something that is kind of quite well understood by consumers as to what, what, what is, what is in those, I think customer understanding around home is one of the insurance.
It's one of the main issues that arose from the investigation that, um, my previous team carried out last year, the subsequent which received complaint building on that as well. Uh, and, uh, as previous evidence was given the focus around consumer understanding of what is covered and what isn't is a kind of crucial, uh. Part of that.
11:23
11:23
11:23
Speaker 12
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Speaker 12
Approaches, uh, and in my, um, in my experience at the regulator, the previous evidence suggested that there are some firms who have adopted it and embraced it very closely. And there are others that have seen this as a. An annoyance, really, and something to be avoided. I've genuinely seen firms seek to embrace it. Uh, at least, at least to me. Anyway. But the focus around, uh, kind of. Claims is what I've seen a lot more is a focus on root cause analysis.
Where you have a firm that they have had increased levels of claims declinature or, or rejecting claims. Understanding why that has occurred has been a kind of one of the jobs that the consumer duty kind of means you should enforce. So at what point in the process do people fall out of it?So is it because they phone up and say, hey, my fence is just blown down in the storm?Um, the insurer says, I'm very sorry to hear that, but your fence is not covered.
Covered by your policy is explicitly excluded. That would count towards those numbers of claims decline because that, that kind of that. Has been asked. There'll be other bits. Where it goes all the way through in a claim is put in and for for a reason it is rejected. Now what my expectation, uh, or what the pardon the FDA's expectation of firms would be to understand what are those main reasons?Why is it those claims are declining, being declined, and either your documentation is not clear enough at the outset.
Your customers don't understand it, or actually you may have the coverage level of this product incorrect. You would expect then to understand that root cause and then the insurer to take action to resolve it by a better information, by changing the levels of cover, by taking, by taking some, by taking some steps. And I think that is an area where the consumer duty has led to, uh, some real significant improvements. I think there's still a long way to go. Um, but there is progress being made.
Where you have a firm that they have had increased levels of claims declinature or, or rejecting claims. Understanding why that has occurred has been a kind of one of the jobs that the consumer duty kind of means you should enforce. So at what point in the process do people fall out of it?So is it because they phone up and say, hey, my fence is just blown down in the storm?Um, the insurer says, I'm very sorry to hear that, but your fence is not covered.
Covered by your policy is explicitly excluded. That would count towards those numbers of claims decline because that, that kind of that. Has been asked. There'll be other bits. Where it goes all the way through in a claim is put in and for for a reason it is rejected. Now what my expectation, uh, or what the pardon the FDA's expectation of firms would be to understand what are those main reasons?Why is it those claims are declining, being declined, and either your documentation is not clear enough at the outset.
Your customers don't understand it, or actually you may have the coverage level of this product incorrect. You would expect then to understand that root cause and then the insurer to take action to resolve it by a better information, by changing the levels of cover, by taking, by taking some, by taking some steps. And I think that is an area where the consumer duty has led to, uh, some real significant improvements. I think there's still a long way to go. Um, but there is progress being made.
11:26
11:26
Speaker 9
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Speaker 9
Well, it's just to follow up on that, um, I'm the non-executive director of a small bank for the consumer duty. We have a team in the bank who not only inspect what everybody else does, but also prepare elaborate reports for the FCA, detailed things which are required and are inspected by the FCA. File these documents and then answer questions about them to show that our procedures are what the FCA expects them to be. Is that the case with insurance companies?Do insurance companies have.
As far as you know. Uh, teams within their operation who are responsible for ensuring that the consumer duty is followed and does the FCA. Inspect the process and the documentation of the enforcement of the consumer duty.
As far as you know. Uh, teams within their operation who are responsible for ensuring that the consumer duty is followed and does the FCA. Inspect the process and the documentation of the enforcement of the consumer duty.
11:27
11:27
11:27
11:27
Speaker 12
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Speaker 12
Elaborate briefly, um, the consumer duty is everybody's responsibility. It should be everyone's responsibility in a bank, in an insurer, in a financial adviser to ensure that the customer is at the heart of the products that are sold. That is the whole ethos behind the consumer duty and why it was required by, by, by Parliament. So, uh. Ideally, it doesn't sit in a team in compliance where everyone can say actually that it's their job to sort out the consumer duty. It should be the job of the salespeople, the people at the counter.
It should be. And the people designing the product. Uh, ideally, the regulator is not requesting vast swathes of. New information to be created for them, but should be relying on what it is that you have received as a non-executive director. What is it your for you to oversee the business appropriately and to understand that your bank is looking after your customers appropriately. That in most cases that will be sufficient information for the regulator to, to rely on. Um so.
There are regulatory returns that firms obviously have to have to submit, but for the most part, I would say insurers would rely on the information that you as a non-executive would receive.
It should be. And the people designing the product. Uh, ideally, the regulator is not requesting vast swathes of. New information to be created for them, but should be relying on what it is that you have received as a non-executive director. What is it your for you to oversee the business appropriately and to understand that your bank is looking after your customers appropriately. That in most cases that will be sufficient information for the regulator to, to rely on. Um so.
There are regulatory returns that firms obviously have to have to submit, but for the most part, I would say insurers would rely on the information that you as a non-executive would receive.
11:28
11:28
Speaker 12
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Speaker 12
In most part, the the role of the board and the role of the regulator should be. Aligned to an extent of ensuring the continued operation of that company and for its ongoing success. And so much of the, the aims of the two are aligned, uh, management. That you receive in order to run the business in most to the most part, should be the same as what the regulator would like to see to, to oversee and ensure that the organisation is complying. That's not to say that's always the case.
And there'll be times when more information is requested in order to to ensure it. And, you know, the the FCA has recently published um. A report saying these are the things that we'd expect to see in board, um annual monitoring of the consumer duty reports. But uh. That that's where I can get all of this comes together nicely.
And there'll be times when more information is requested in order to to ensure it. And, you know, the the FCA has recently published um. A report saying these are the things that we'd expect to see in board, um annual monitoring of the consumer duty reports. But uh. That that's where I can get all of this comes together nicely.
11:29
11:29
11:30
11:30
Speaker 12
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Speaker 12
That is what I said. Um, so the, the 100 or so, uh, the direct supervisors of the, of the firms, there are many other colleagues that support them. So there will be a separate team of actuaries. There is a separate team responsible for the authorisation of firms. There is a separate team for enforcement.
11:30
11:30
11:31
11:31
Speaker 12
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Speaker 12
Uh, so so the decision around allocation of resources, um, is probably one for the. FCA to, for you to, but, but just to give, but just to give a summary of, of my understanding of it actually would be based on the risks. There's a set, this is the size of the organisation. These are the risks in terms of to the statutory objectives. Uh, the organisation has and resourcing is allocated.
11:31
11:31
Speaker 15
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Speaker 15
Previous question is about um information about claims rates and acceptances. And the sort of presumption was that it was the companies who uh, differed in their acceptance rates. To what extent is there a fraud problem in claims?I remember some years ago I had a flood in my house and in the end I didn't claim. But while I was toying with claim and I talked to people, they said, oh, this is a wonderful opportunity to get the whole house redecorated. You can get new carpets.
You know, I was astonished. Very reputable people assumed that an insurance claim was an opportunity for you to rip off the insurance company. As I say, I the person who caused the flood, accepted responsibility. It didn't come to an insurance claim, but I just wonder how general this is that the public think that an insurance claim is a chance to rip off insurance companies.
You know, I was astonished. Very reputable people assumed that an insurance claim was an opportunity for you to rip off the insurance company. As I say, I the person who caused the flood, accepted responsibility. It didn't come to an insurance claim, but I just wonder how general this is that the public think that an insurance claim is a chance to rip off insurance companies.
11:32
Speaker 12
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Speaker 12
Unfortunately, insurance fraud is a real issue. Uh, fraud of insurers is something that is actually not really something that the FDA tends to look at. And, uh, in this thing called the Motor Insurance Bureau, for example, that looks specifically around that issue for motor, the Abi and firms do share information. There are logs of claims so that. So it's possible to understand, uh, what, what, what is being claimed. But, um, you know, there is a loss adjusters exist for a reason.
And part of their role is to assess the job of insurance should always be to put you back in the position you would have been absent. The issue occurring that's caused you to claim. And so that doesn't mean unless you've bought a policy that is new for old, for example, uh, it is to put you back in the same place that you were you were prior. Not to, not to redecorate your house.
And part of their role is to assess the job of insurance should always be to put you back in the position you would have been absent. The issue occurring that's caused you to claim. And so that doesn't mean unless you've bought a policy that is new for old, for example, uh, it is to put you back in the same place that you were you were prior. Not to, not to redecorate your house.
11:33
11:33
11:34
Speaker 12
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Speaker 12
I, I. It is incredibly important that consumers can get can make their claims easily. And one of the key tenants of the consumer duty is customer support. At the point of claim. Uh, how easy, you know at the time that you are your most vulnerable. You're never in a good place when you're filling up an insurer to claim. What support are you given?Uh, and how and how are you treated?Where there are large walkways, where there are difficult processes, those are the issues that consumers rightly complain about.
Uh, and those are the issues that in aggregate, individually, they looked at by the financial Ombudsman, but in aggregate, they come to the FCA to understand whether or not there's a macro issue with that particular firm or with that part of the market, uh, as a, as a whole, I think one of the difficulties with home insurance, uh, if you take things like floods, it's not one house, you know, depending if it might be a burst pipe, it's one house. But generally when there is a weather event, it is, uh, a number of houses.
It uses up all of the people in that town who have the skills, you know, all the plasters get used up all of their, um, all of their decorators get, get used. And so actually it is a very difficult job. That is not the same for motor insurance where there's enough garages. Well, actually there's not, that's part of the problem. But the you don't have a vast. Number of cars all requiring fixing at the same time with many home issues.
They occur because something has occurred in a in a vicinity and that. And so there are many externalities that have an impact on the ability of those claims to be dealt with.
Uh, and those are the issues that in aggregate, individually, they looked at by the financial Ombudsman, but in aggregate, they come to the FCA to understand whether or not there's a macro issue with that particular firm or with that part of the market, uh, as a, as a whole, I think one of the difficulties with home insurance, uh, if you take things like floods, it's not one house, you know, depending if it might be a burst pipe, it's one house. But generally when there is a weather event, it is, uh, a number of houses.
It uses up all of the people in that town who have the skills, you know, all the plasters get used up all of their, um, all of their decorators get, get used. And so actually it is a very difficult job. That is not the same for motor insurance where there's enough garages. Well, actually there's not, that's part of the problem. But the you don't have a vast. Number of cars all requiring fixing at the same time with many home issues.
They occur because something has occurred in a in a vicinity and that. And so there are many externalities that have an impact on the ability of those claims to be dealt with.
11:35
11:35
Speaker 5
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Speaker 5
Can you tell us from, uh, I mean, you have vast experience in the area. We've had the consumer duty for three years or so. Um where do you come out in terms of do we need more regulation now or are there specific areas which we should be thinking about for more regulation or. Is the way that people embrace the principles which were enunciated with the consumer duty sufficient really to deal with the problem, the problems that the consumer duty was introduced to deal with.
11:36
Speaker 12
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Speaker 12
It's a good question. I don't think there is a I don't there are many different views. Uh, so I'll give you mine, but it'll be so, um, in my time at the FCA. Uh, the insurance distribution directive came in a European directive around, uh, how products were sold, the general insurance pricing practices rules got introduced, uh, which are around to stop loyal customers being charged more for staying with the same insurer. Um, the product governance rules were introduced that again, looked at fair value assessments.
All of these were very detailed rules and very prescriptive as to this is what you can and can't do. And, uh, a lot of that was really good stuff. And some of it wasn't, it got in the way. It made life more difficult for insurers. It, it didn't have the intended impact that it was meant to, uh, what has also. Been introduced is the consumer duty, which is the other end of the spectrum of saying these are the broad principles.
Um, personally, I much I much prefer the principles, um, because it means that you don't need the vast detail that kind of goes on underneath it. But what insurers need, what the industry need is guidance. It needs support to understand this is what good looks like. And this is this is what we don't want to see. And what the FCA published last year around travel, uh, and how. And, and in their review on outsourcing. And that was focused on saying actually in this type of market, some of the risks around outsourcing, uh, potentially leading to bad outcomes for consumers and more needs to be done here.
And there are, you know, we want to remind insurers that you can outsource the work. You can't outsource the responsibility. It's still you, uh, who's on the hook. Um, and you need to have better management information. You need to be more on top of it than you are all of. That is helping is there's no new rules that have been written, but it's given that extra information to insurers to say, this is what the the expectations are. And it allows for firms to interpret it.
Uh, it allows for firms then to implement it in a way that works for their business with rules like the price walking rules that I mentioned before, it created very different incentives for different firms and changed how the market operated in ways that weren't necessarily understood at the time, that the rules were introduced. A principles based approach allows you to do what's best for your business and your customers. So I have a preference for that.
All of these were very detailed rules and very prescriptive as to this is what you can and can't do. And, uh, a lot of that was really good stuff. And some of it wasn't, it got in the way. It made life more difficult for insurers. It, it didn't have the intended impact that it was meant to, uh, what has also. Been introduced is the consumer duty, which is the other end of the spectrum of saying these are the broad principles.
Um, personally, I much I much prefer the principles, um, because it means that you don't need the vast detail that kind of goes on underneath it. But what insurers need, what the industry need is guidance. It needs support to understand this is what good looks like. And this is this is what we don't want to see. And what the FCA published last year around travel, uh, and how. And, and in their review on outsourcing. And that was focused on saying actually in this type of market, some of the risks around outsourcing, uh, potentially leading to bad outcomes for consumers and more needs to be done here.
And there are, you know, we want to remind insurers that you can outsource the work. You can't outsource the responsibility. It's still you, uh, who's on the hook. Um, and you need to have better management information. You need to be more on top of it than you are all of. That is helping is there's no new rules that have been written, but it's given that extra information to insurers to say, this is what the the expectations are. And it allows for firms to interpret it.
Uh, it allows for firms then to implement it in a way that works for their business with rules like the price walking rules that I mentioned before, it created very different incentives for different firms and changed how the market operated in ways that weren't necessarily understood at the time, that the rules were introduced. A principles based approach allows you to do what's best for your business and your customers. So I have a preference for that.
11:38
Speaker 5
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Speaker 5
Can I just ask you, following up on that, uh, in terms of making sure that people really understand the principles or just. Maybe providing more information, but, you know, how do you then manage an insurance company when you really do you feel we're doing enough?I mean, are we putting. Uh, you know, the ways of, of getting people to be involved in that?I mean, you can imagine many different ways. And I just wonder. Um, if the channel is too narrow and whether we, whether enough is being done to really drive home the principles.
11:39
Speaker 12
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Speaker 12
To contribute itI do you mean?I, I think. It's the. There are bits that I think have been largely implemented very well. There are bits. Customer understanding is a really big one that I think still. Of what we're talking about here is people not understanding the, the kind of what home insurance is. And there is a job for insurers to do there. But I don't believe it's just the job of the insurers to educate.
Um. Consumers as to what they, what they, um, what they. Need. Tricky thing is when you buy your insurance, you never know what you're going to be claiming for. You don't know that six months down the line, you're going to have a burst pipe. And we'll need to do that. And so no, I, I know very, very, very few people who would ever go through and read their insurance product, their documentation. And even if you did, you haven't got the perfect information of why you're going to claim later on.
So understanding the key aspects of what is in your policy. Um, actually, for me, when I do it, when I buy my own policy, I think about what matters to me is the service I get. I want to phone at once. I want to make it somebody else's problem, uh, and have that increased level of service that may mean that that policy costs more, uh. Than one where you have some consumers who they are very price sensitive and want to buy and need to buy the very cheapest product that they need in order to protect their house.
They have got a good deal when if they don't need to claim they've paid, they've wasted the least amount of money on the policy. But when they come to claim they may, they have got a basic product and will not receive what they what they have. And some people need to make that decision out of necessity. Others are making it from a lack of understanding. Um, and I think there is a duty for the industry, but also actually it's financial education much more broadly to understand the purpose of insurance.
And when you, when you need it.
Um. Consumers as to what they, what they, um, what they. Need. Tricky thing is when you buy your insurance, you never know what you're going to be claiming for. You don't know that six months down the line, you're going to have a burst pipe. And we'll need to do that. And so no, I, I know very, very, very few people who would ever go through and read their insurance product, their documentation. And even if you did, you haven't got the perfect information of why you're going to claim later on.
So understanding the key aspects of what is in your policy. Um, actually, for me, when I do it, when I buy my own policy, I think about what matters to me is the service I get. I want to phone at once. I want to make it somebody else's problem, uh, and have that increased level of service that may mean that that policy costs more, uh. Than one where you have some consumers who they are very price sensitive and want to buy and need to buy the very cheapest product that they need in order to protect their house.
They have got a good deal when if they don't need to claim they've paid, they've wasted the least amount of money on the policy. But when they come to claim they may, they have got a basic product and will not receive what they what they have. And some people need to make that decision out of necessity. Others are making it from a lack of understanding. Um, and I think there is a duty for the industry, but also actually it's financial education much more broadly to understand the purpose of insurance.
And when you, when you need it.
11:42
11:42
Speaker 7
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Speaker 7
Is there any. Reliable. Data which shows over a period of time that things have. Broadly speaking, in these markets from a consumer point of view. Got better. Stayed the same or got worse. And the underlying question behind that is. So all this activity regulatory, supervisory, political interference, whatever, so I entirely take your point. You gave some examples of where in specific areas, it drives some sets of behaviour that may or may not have been what was originally intended.
And you gave the example of the, the European um framework. But do, do we do we know in broad terms whether things have got better, got worse or broadly stayed the same because you know, points about definitional issues in policies. I mean, no one's ever understood what's in a policy. So, you know, we. We've had that issue forever with insurance. Um, so, you know, is a claims. Handling, getting better, staying the same, getting worse. What's your what's your view or what do we know?
And you gave the example of the, the European um framework. But do, do we do we know in broad terms whether things have got better, got worse or broadly stayed the same because you know, points about definitional issues in policies. I mean, no one's ever understood what's in a policy. So, you know, we. We've had that issue forever with insurance. Um, so, you know, is a claims. Handling, getting better, staying the same, getting worse. What's your what's your view or what do we know?
11:44
Speaker 12
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Speaker 12
What do we know?Say it's. A, it's a really, really difficult question. And I've had, um, when we were, I was working on a motor insurance taskforce a couple of years ago. Ministers were asking the same question around car insurance. What's happened?Actually, cars have got more expensive. Therefore claims that have got more expensive. Therefore the price has gone up. Therefore. And actually cars are more disposable than they used to be.
And so therefore. Actually it's very difficult to you're not comparing apples with apples. Um. Generally we've seen prices in real terms for most products, remain broadly stable. Uh, there are a number of different kind of quirks around bans and price walking that have made their be, um, there's changes, but for example, home insurance last year was 5% cheaper on average than it was the year, the year before. Um, and insurers broadly broke even around these products. So from a financial perspective, um, sometimes costs go up because claims go up, prices go up.
Um, but, but they have been coming down as well. Coverage levels. I think there are more products available now. And so there are more choice. There's more choice for consumers at the price point that works for them. Uh, so it is a bigger market. There is more choice. It is a competitive market. So there is good, uh, there are many new entrants that kind of, that come in and which shows it's working well as a, as a market.
Uh, how is it working for consumers in kind of claims terms?I think there are clearly issues that need resolving. Those are the ones that have been flagged in the FCA report and also by, by. The which super complaint. We haven't talked about travel. Um, I think travel works well for um those. People who do not have underlying health conditions. Uh, I think there are significant issues around a availability of the product, uh, for, for others who do.
And in a world where we are living longer and with diseases, actually understanding how product is going to continue to develop, to work for consumers. Uh, that's probably an area where more work. Is being done and needs to be done by insurers, regulators, um, to, to understand it.
And so therefore. Actually it's very difficult to you're not comparing apples with apples. Um. Generally we've seen prices in real terms for most products, remain broadly stable. Uh, there are a number of different kind of quirks around bans and price walking that have made their be, um, there's changes, but for example, home insurance last year was 5% cheaper on average than it was the year, the year before. Um, and insurers broadly broke even around these products. So from a financial perspective, um, sometimes costs go up because claims go up, prices go up.
Um, but, but they have been coming down as well. Coverage levels. I think there are more products available now. And so there are more choice. There's more choice for consumers at the price point that works for them. Uh, so it is a bigger market. There is more choice. It is a competitive market. So there is good, uh, there are many new entrants that kind of, that come in and which shows it's working well as a, as a market.
Uh, how is it working for consumers in kind of claims terms?I think there are clearly issues that need resolving. Those are the ones that have been flagged in the FCA report and also by, by. The which super complaint. We haven't talked about travel. Um, I think travel works well for um those. People who do not have underlying health conditions. Uh, I think there are significant issues around a availability of the product, uh, for, for others who do.
And in a world where we are living longer and with diseases, actually understanding how product is going to continue to develop, to work for consumers. Uh, that's probably an area where more work. Is being done and needs to be done by insurers, regulators, um, to, to understand it.
11:47
Speaker 7
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Speaker 7
Okay. Just ask a topic dear to our heart in this committee, the secondary growth and competitiveness objective which had come in while you were still there. Um. What, what effect, if any, did that have have on how you thought about your work and how you reflect overall on the place of the role of regulation in trying to, uh, have a well functioning market?
11:48
Speaker 12
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Speaker 12
So when it comes to consumer products, like we're talking about today, actually, there is a strong need. Many of the questions I'm. Around consumer protection. And so there is that cloak of, um. Uh, regulation that exists here. And I think it's one of those areas where in the case of international competitiveness, there has been less focus on these products because we want the FCA wants to have that strong oversight of them. In. Another part of my old job was the Lloyds and the London market.
And that's an area where a lot of focus was given to the areas of regulatory simplification. Uh, and, you know, there was a significant pressure and support from London's markets group. The, um, and the LMA and others for how regulation that had potential, that had overstepped the line and consumer regulation that was impacting a wholesale business, how that should be kind of taken, taken back. Uh, and, you know, a much more caveat emptor approach taken to, to how, um, you know, wholesale insurance works.
And I think that's one of the big successes, but that's more in the wholesale side rather than the consumer side.
And that's an area where a lot of focus was given to the areas of regulatory simplification. Uh, and, you know, there was a significant pressure and support from London's markets group. The, um, and the LMA and others for how regulation that had potential, that had overstepped the line and consumer regulation that was impacting a wholesale business, how that should be kind of taken, taken back. Uh, and, you know, a much more caveat emptor approach taken to, to how, um, you know, wholesale insurance works.
And I think that's one of the big successes, but that's more in the wholesale side rather than the consumer side.
11:49
11:50
11:50
11:50
11:50
11:50
Speaker 12
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Speaker 12
Um so in terms of complaints that were made around home insurance, both building and contexts contents insurance last year to the Ombudsman, they were about 15,000 or so. That was an increase. It was the second most complained about insurance product. Um, and around 30% of those were upheld. So about 5000 or so. So if you if you go on the basis of how many home. Sorry, I didn't know how many policies are sold in the UK, but one would imagine it's in the 20 to 30 million based on the number of the housing stock here.
Uphold rates of 5000 complaints. Is is very low uh by the Ombudsman.
Uphold rates of 5000 complaints. Is is very low uh by the Ombudsman.
11:51
11:51
11:52
11:52
11:52
11:53
Speaker 12
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Speaker 12
I think. Last year, the FCA's review of saying this is what how outsourcing this market works, uh, highlighted a number of areas. And I think that's the first review on the back of that, uh, the FDA said that there have been, uh, two firms that are being, have been put into enforcement. Uh, reviews that were undertaken, additional reviews, uh, what are called section 166. So external reviews carried out in a few other cases, business restrictions used, uh, as well. So there has been.
An increased focus on it. Uh, and that will continue. So I think there was no suggestion of being introduced. They were. So from that basis, I think the take on it is that the existing rules from the consumer duty and what sits underneath it, um, is already sufficient. But those areas where there was perhaps a lack of understanding or when more needs to be done by the industry was highlighted. Um, Matt, my predecessor at this table was talking about storm claims being one of those areas.
That's one of those areas where, uh, the FDA has requested that the Abi, the. The trade body for insurers do a lot more around storm damage. Um, and making clear to consumers what is covered, what isn't covered, um, and trying to get a more industry wide, uh, consistent. Approach to, to those issues you.
An increased focus on it. Uh, and that will continue. So I think there was no suggestion of being introduced. They were. So from that basis, I think the take on it is that the existing rules from the consumer duty and what sits underneath it, um, is already sufficient. But those areas where there was perhaps a lack of understanding or when more needs to be done by the industry was highlighted. Um, Matt, my predecessor at this table was talking about storm claims being one of those areas.
That's one of those areas where, uh, the FDA has requested that the Abi, the. The trade body for insurers do a lot more around storm damage. Um, and making clear to consumers what is covered, what isn't covered, um, and trying to get a more industry wide, uh, consistent. Approach to, to those issues you.
11:54
11:55
Speaker 12
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Speaker 12
Um, I was waiting for a question like that. Um, no, I, you know, I um. Always hoped that firms were trying to do the, the right thing. I always believe that it's actually in the best interests of businesses to look after their customers. Um, for, and for the most part, many of them do. And that's been consistent with what I've seen on, on this side of the table. I think firms are seeking to understand what it is that the regulator wants and how best to, to do it.
Uh, and I think they're, um, yeah, these are complex issues that they're grappling with and, uh, they are continuing to work on it and the light being shone on it by consumer groups, by the regulator, I think helps give them more information and more data to, uh, to, to improve that further. And I think I would hope that as a result of the FDA's work, as a result of the super complaint and as a result of the, uh, additional work that firms are doing on the back of both of those, it will result in a better outcome for consumers over that will be visible over the next couple of years.
Uh, and I think they're, um, yeah, these are complex issues that they're grappling with and, uh, they are continuing to work on it and the light being shone on it by consumer groups, by the regulator, I think helps give them more information and more data to, uh, to, to improve that further. And I think I would hope that as a result of the FDA's work, as a result of the super complaint and as a result of the, uh, additional work that firms are doing on the back of both of those, it will result in a better outcome for consumers over that will be visible over the next couple of years.
11:56
11:56
Speaker 12
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Speaker 12
I don't think I'm well placed to do so. But what I will say is when I was in my previous role, the Ombudsman was a really strong source of information in terms of these are the issues that are coming up from the consumer consumer group. These are the challenges that they're facing. This is where we are seeing increased levels of complaints that helped drive where the regulator focuses at a macro level, so close into close working of the two, um is essential.
11:56
11:57
11:57
11:57
11:57
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11:58
11:58
Speaker 12
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Speaker 12
Um, I assume sitting at this table answering questions about what I did in my previous role will be one of the things that he'll be doing later. Maybe. Maybe after the recess. Um, but, uh. You know, I think. There will always be. Um, individual products where the world changes and there are new issues that come up that cannot be foreseen. Um, what happened to, uh, insurance for flats, for example, after Grenfell, the Grenfell tragedy?Um, was and how the cost of insurance for those went through the roof.
Um very quickly, very quickly. And um the impact that had on those people actually was uh. A really important, but also difficult job, but one that couldn't be foreseen in advance of that occurring. And so, uh, yeah, I think the main piece of advice is you almost. Everything that happens links back to insurance somehow. And so finding out what that, what that will be, whether that's a war, um, whether that's a pandemic, whether whether that is a tragedy of a, of a large fire, uh, understanding what the impact of that will be on you as quickly as possible is always job one and probably part two.
And it's an issue that I cared. A lot about and worked on a lot. And with the Treasury around financial inclusion. Um, and what more can be done to ensure that um, the. Both the poorest in society, but also people with pre-existing medical conditions, for example, have access to the products and services that they need and insurance that they need. Um. How, how to, how to do that. Uh, is one of those areas where I think there's still, there's still more to, to, to do.
And I know the Treasury and insurers are working together together on it, but, uh, ensuring that social renters have the ability to cover their possessions and having that product made available to them is one of those areas where I'd really encourage him to continue to focus.
Um very quickly, very quickly. And um the impact that had on those people actually was uh. A really important, but also difficult job, but one that couldn't be foreseen in advance of that occurring. And so, uh, yeah, I think the main piece of advice is you almost. Everything that happens links back to insurance somehow. And so finding out what that, what that will be, whether that's a war, um, whether that's a pandemic, whether whether that is a tragedy of a, of a large fire, uh, understanding what the impact of that will be on you as quickly as possible is always job one and probably part two.
And it's an issue that I cared. A lot about and worked on a lot. And with the Treasury around financial inclusion. Um, and what more can be done to ensure that um, the. Both the poorest in society, but also people with pre-existing medical conditions, for example, have access to the products and services that they need and insurance that they need. Um. How, how to, how to do that. Uh, is one of those areas where I think there's still, there's still more to, to, to do.
And I know the Treasury and insurers are working together together on it, but, uh, ensuring that social renters have the ability to cover their possessions and having that product made available to them is one of those areas where I'd really encourage him to continue to focus.
12:01
Speaker 6
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Speaker 6
On an issue that's come up is, is how well does the customer understand the product that they bought?What could be done or what needs to be done to make sure that that process, whether when you buy the thing in the first time or when you renew it later on, that people understand what the the cover is. I mean, the interesting thing about storm damage, it seems to me a, a big gap in, uh. Where people, the householders understanding what their cover is. Um, what is the best way to go about trying to, uh, reduce those gaps and misunderstandings and.
Between the parties. Yeah.
Between the parties. Yeah.
12:01
12:01
Speaker 4
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Speaker 4
I don't know. Um, when have you take out insurance products?You get a one pager, an iPod. It's called, um, that has on it the kind of key information about that product, but it doesn't cover everything. It's not necessarily saying you're necessarily going to refer to again. And next time most people will pick up a policy after it gets emailed to them, after they've bought bought something or is, is when they come to, to claim. Um, and so having.
It's very difficult to say you can't expect. Nobody has perfect information to know what is going to be coming down the road. What, uh, issue may cause them to need to claim on their insurance. And so how do you ensure everyone is aware of all of the different exclusions of their policy?It's a it is very difficult. Um, I think there are some really key points to it that many consumers are unaware of, such as, um, wear and tear.
Of a building. It is if you're, if you have tiles hanging off your roof or your gutters broken or whatever, and there's a storm, it doesn't mean you get new gutters, you're excluded. There are exclusions for poor wear and tear. Uh, of. Of a building. Storms. You know, the wind has to be of a certain speed, for example, for it to, to count as a storm damage. All of these pieces are areas where the FDA has asked that the industry collectively put their heads together and think about what more can be done.
But more broadly, there is a financial education piece, um, that. That is broader than just individual policies, I think.
It's very difficult to say you can't expect. Nobody has perfect information to know what is going to be coming down the road. What, uh, issue may cause them to need to claim on their insurance. And so how do you ensure everyone is aware of all of the different exclusions of their policy?It's a it is very difficult. Um, I think there are some really key points to it that many consumers are unaware of, such as, um, wear and tear.
Of a building. It is if you're, if you have tiles hanging off your roof or your gutters broken or whatever, and there's a storm, it doesn't mean you get new gutters, you're excluded. There are exclusions for poor wear and tear. Uh, of. Of a building. Storms. You know, the wind has to be of a certain speed, for example, for it to, to count as a storm damage. All of these pieces are areas where the FDA has asked that the industry collectively put their heads together and think about what more can be done.
But more broadly, there is a financial education piece, um, that. That is broader than just individual policies, I think.
12:04
12:04
Speaker 1
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Speaker 1
Um, yes. I'm just trying to work out whether is the majority, if not all of the information that you get about, um, you know, troubles and complaints, um, from secondary sources. Um, so I think you mentioned letters from MPs. So that's presumably would, and you know, committee expressions from Parliament would come direct to the, to the FCA, but the rest is because. Complaints predominantly go to the Fos. So that's, that's uh, if you. Like secondary and I suppose you read the news.
I mean, do you do any mystery shopping as such so that you have first hand experience?I mean, obviously personally, you each have your, your hundred people are doing something or other for themselves. I mean, do they bring their experiences to the office, as it were?And or do you actually set out to go hunting for things and looking at websites and finding out what's going on?Or do you do that by asking questions of the supervised firms?
I mean, do you do any mystery shopping as such so that you have first hand experience?I mean, obviously personally, you each have your, your hundred people are doing something or other for themselves. I mean, do they bring their experiences to the office, as it were?And or do you actually set out to go hunting for things and looking at websites and finding out what's going on?Or do you do that by asking questions of the supervised firms?
12:05
Speaker 4
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Speaker 4
One of the joys of changing jobs is that, um, I don't know. Everyone tells me their insurance woes whenever I bump into my friends or when I'm ever in. So. Second hand sources is the main way, like through the ombudsman, through complaints, through other pieces rather than, um, mystery, mystery shopping. It is used occasionally, um, in certain parts of regulation, but it is not a primary source of, of, of information. Yeah. Actually the many of the consumer groups will, will do that and will share their analysis and their thoughts and their, um, with us.
So, uh, but there's less mystery shopping is not a primary, uh, yeah.
So, uh, but there's less mystery shopping is not a primary, uh, yeah.
12:06
Speaker 16
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Speaker 16
Yes. I mean, it is striking that almost everyone has a story about an insurance company letting them down in some way or other. I mean, just raising the issue. People say, oh yes, that occurred, you know, and so on and so forth. And, uh, I wonder, first of all, I'd like to. Repeat the question I asked to the previous witness about motor insurance and motor insurance. The a lot of it is legally defined. What must be insured?Of course, but certainly all the third party fire and rescue stuff.
Um, and we have a remarkable level of acceptance of claims. Is there something is it just the simplicity of motor insurance as our previous witness suggested, or is it the fact that there is a very clearly defined requirement legally that ensures that the customer knows what they're getting and the insurer knows what they must provide?So is the law there important?
Um, and we have a remarkable level of acceptance of claims. Is there something is it just the simplicity of motor insurance as our previous witness suggested, or is it the fact that there is a very clearly defined requirement legally that ensures that the customer knows what they're getting and the insurer knows what they must provide?So is the law there important?
12:07
Speaker 4
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Speaker 4
Yeah. Um. I think when it comes to motor insurance, there's a limited number of things that can go wrong. I can hit you, you can hit me. There could be an uninsured driver involved. There are only a small number of real issues that can occur compared to in a in a home where a pipe can burst. Now it's a pipe under your house. Is it on your property?Is it one that feeds your property?Is it the.
Stations and where what the issues are that can occur and whose responsibility it is are much more complex when it comes to, um, home. Assurance compared to motor. Uh and. And so I think for a large part, I think that I think that is the, the main reason.
Stations and where what the issues are that can occur and whose responsibility it is are much more complex when it comes to, um, home. Assurance compared to motor. Uh and. And so I think for a large part, I think that I think that is the, the main reason.
12:08
Speaker 16
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Speaker 16
Okay, I've come to consumer duty. I mean, if we look at the terms of the consumer duty, enable and support customers to pursue their financial objectives, provide clear information and effective support. Um, avoid causing foreseeable harm, etcetera, etcetera. Do we really think that the insurance industry is following those conditions?Because the nature of the complaints and the scale of the complaints, given that a significant proportion of people who are harmed will not complain and won't realize that the fuzz is there and all this sort of thing, do we really feel that the consumer duty is being followed effectively in this industry?
12:09
Speaker 4
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Speaker 4
So many people who do complain. Oh, sorry. Pardon me, who do have reason to claim have a positive. Uh, experience. No one, no one claims from a position of happiness. You're claiming because something bad has happened to you, and in many cases, you actually, uh, the vast majority of claims are solved both before the consumer duty and post consumer duty.
12:09
12:09
Speaker 4
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Speaker 4
As I said, there are a number of reasons for it. But firstly, there. Are. A 75 to 80% of these claims that we're talking about are paid out. Uh, there aren't complaints about them. And the customers put back how they were. And it is a sector that, um, I think is, um, I'm trying to find something that's not. The sector is on a journey. It continues to be improving, uh, around these areas, in my view, uh, around improving how customers understand their products.
There are some great, uh, companies and. Charities that have been set up to help, uh. Insurers change the wording of their policies. So to make them that they can be, understandable, understandable to people who have a primary level education and who have appropriate lower reading ages. A study that was done a decade ago suggested that the length and complexity of some policies require they were longer than Shakespeare, and they were more complex than a PhD thesis. And insurers are putting a lot of effort, uh, and are getting a lot of support from, from groups to help them improve those languages.
I think it's a, it's never going to be perfect. There will never be able to cover every eventuality. Uh, and, but for the most part, uh, the evidence I have from my old role and my current role is that firms are trying to continue to improve, to give that good customer service because it is good for their business.
There are some great, uh, companies and. Charities that have been set up to help, uh. Insurers change the wording of their policies. So to make them that they can be, understandable, understandable to people who have a primary level education and who have appropriate lower reading ages. A study that was done a decade ago suggested that the length and complexity of some policies require they were longer than Shakespeare, and they were more complex than a PhD thesis. And insurers are putting a lot of effort, uh, and are getting a lot of support from, from groups to help them improve those languages.
I think it's a, it's never going to be perfect. There will never be able to cover every eventuality. Uh, and, but for the most part, uh, the evidence I have from my old role and my current role is that firms are trying to continue to improve, to give that good customer service because it is good for their business.
12:11
12:11
Speaker 4
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Speaker 4
So one of the one of the areas that, uh, I think the FCA published in their publication, um, following the, which super complaint was, uh, how, how will our success be measured?And that included, uh, if I, if I recall correctly, points such as, uh, reduction in the levels, some of, some of that is also down to issues such as if I phone up and say, hey, my fence is blown down, am I covered?Should that be covered as a sum?Is that covered as a rejected claim, for example?And so there are definitional points as well that will have a significant impact on those numbers.
But I think transparency of those numbers is important. It gives that confidence to consumers. Um, but it only works if it's all done on a level playing field and done in the same way. And I think that's an area where the aggregators, the price comparison websites, where the vast majority of people buy their insurance, they have a role to play in ensuring they provide that information, um, to, to, in a way that enables customers, consumers to make that decision at the outset as to, as to what it is that they're providing.
But I think transparency of those numbers is important. It gives that confidence to consumers. Um, but it only works if it's all done on a level playing field and done in the same way. And I think that's an area where the aggregators, the price comparison websites, where the vast majority of people buy their insurance, they have a role to play in ensuring they provide that information, um, to, to, in a way that enables customers, consumers to make that decision at the outset as to, as to what it is that they're providing.
12:12
12:12
12:13
12:13
12:13
12:13
Speaker 11
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Speaker 11
Um. The. You've contrasted the acceptance levels of home and building very high for motor. Is the possibility that actually what was going on in the motor sector is that the industry was accepting too many claims, whiplash in particular, and was very slow to catch on to the fact that when people said they had suffered a harm, that they hadn't, and that showed up in premiums for everyone else, but it made them look good in terms of the acceptances that they reported.
12:14
Speaker 4
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Speaker 4
The whiplash performance came in a couple of years ago now. Um, I mean, I. The FCA implementation of. A GT and I believe for the majority of insurers, their approach is not to look for ways to decline claims. It. I don't believe that is the approach. And actually many of those firms that are writing home insurance also write motor insurance. So we have. I don't believe that there is a vast difference between this part of an organisation and the ones that are sitting next to it, doing a, doing a different product.
I think there is a. What what it shows. Us is, uh. The customer understanding piece, the lack of clarity, perhaps as to what is covered is more significant on some on products such as home than it is for motor. And I think that's what the FCA's work is getting to. Um, and what the super complaint has focused, focused on.
I think there is a. What what it shows. Us is, uh. The customer understanding piece, the lack of clarity, perhaps as to what is covered is more significant on some on products such as home than it is for motor. And I think that's what the FCA's work is getting to. Um, and what the super complaint has focused, focused on.
12:15
Speaker 9
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Speaker 9
Um. It's clear from what we've heard today. And I think what one knows generally about the market, and in light of the super complaint that's been made, that this is a market that's characterised by a, a. Lack of transparency, accepting that it's a complicated multi, uh. A lot of complexity therefore. Is the. FCA imposing sufficient attention, putting sufficient attention on the details of the consumer duty in this area. Should it be rather more forceful about.
This is the type of information. I mean, you've just listed some exclusions, which would come as a surprise to a lot of people. Wear and tear tree damage. We heard one earlier about deductibles being applied not to the whole house, but every room in the house. Now, these are simple issues that could be raised at the start. Shouldn't the FCA be taking a more vigorous approach because it has responsibilities here, as indeed to the insurers themselves, for their own managing their own risk?It seems to me a bit sloppy.
This is the type of information. I mean, you've just listed some exclusions, which would come as a surprise to a lot of people. Wear and tear tree damage. We heard one earlier about deductibles being applied not to the whole house, but every room in the house. Now, these are simple issues that could be raised at the start. Shouldn't the FCA be taking a more vigorous approach because it has responsibilities here, as indeed to the insurers themselves, for their own managing their own risk?It seems to me a bit sloppy.
12:17
12:17
Speaker 4
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Speaker 4
I understand your point. I do, I think the challenge would be. You don't know what part of your insurance product you are going to claim on this year. You don't know if your house is going to be damaged by a storm, if it's going to be damaged by, um, a. Water pipe or whatever. To, to, to emphasize every aspect of the, of the product. Well, then you have your terms and conditions and the policy document.
So how. How does one. Uh, highlight those?What is a key?Uh, inclusion or exclusion?I mean, the fact is that almost all insurance policies will exclude fences, for example, that go down as a result of storm damage, but not if a driver drives through your fence, for example. So it depends on the context of what has happened, how it's happened, and to and that is in the policy document. But how, how. Is it right to, to, uh, require consumers to understand or be presented with all of that information when they, when they are purchasing the product?How, what is the most appropriate way of doing so?And I think that is a real challenge.
I, I'm afraid I don't have a simple answer to that.
So how. How does one. Uh, highlight those?What is a key?Uh, inclusion or exclusion?I mean, the fact is that almost all insurance policies will exclude fences, for example, that go down as a result of storm damage, but not if a driver drives through your fence, for example. So it depends on the context of what has happened, how it's happened, and to and that is in the policy document. But how, how. Is it right to, to, uh, require consumers to understand or be presented with all of that information when they, when they are purchasing the product?How, what is the most appropriate way of doing so?And I think that is a real challenge.
I, I'm afraid I don't have a simple answer to that.
12:19
12:19
Speaker 4
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Speaker 4
I think that's a that's a very, uh, it's a very good point. Um, I think there's a, there's a whole range of different parts of the process where AI could play a positive role. So at the moment, insurers are required to understand the demands and needs of every consumer who comes along to buy them so that they are sold the product that makes sense for them. Um, you know, so understanding where you live, therefore, what the most likely risks are that could come into play.
Insurers will generally be taking that into account when they're, when they are pricing and underwriting that, that risk. But from a consumer perspective, to understand, to ensure that it highlights to you, um, what the most likely or what the deductibles are or what the main risks are for those that's, you know, potentially one of those areas where AI could work well on for, for, for the consumer. It's not an area where I've seen yet. Um. Uh, any real significant step forward to the way you described, but I wouldn't, I would expect that that type of, um, solution may be available in the not too distant future.
Insurers will generally be taking that into account when they're, when they are pricing and underwriting that, that risk. But from a consumer perspective, to understand, to ensure that it highlights to you, um, what the most likely or what the deductibles are or what the main risks are for those that's, you know, potentially one of those areas where AI could work well on for, for, for the consumer. It's not an area where I've seen yet. Um. Uh, any real significant step forward to the way you described, but I wouldn't, I would expect that that type of, um, solution may be available in the not too distant future.
09:44
Speaker 9
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Speaker 9
I presume that the duty of care applies to the potentially long chain of outsourced claims handling. Each of those entities, some of which are professional bodies, are required to honour. The. Duty of care. Do they act on the interests of the consumer or do they rewarded generally by reducing the amount of the payout.
09:44
09:44
09:45
Speaker 4
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Speaker 4
I think one of the areas that the FCA flagged in the report was an area. Where more work was needed was greater oversight of Outsourcers, both in terms of allowing boards to have better management information of what was being done, but better view as to the incentive, how people how those companies were incentivised. Um, you know, as a regulator, I would have been, uh, unhappy. To, to see incentives that said, you know, if you actually, I don't believe that there will be a contract out there that says you are expected to decline X percentage of claims or anything like that, that.
That will not exist. Um, what is necessary is for firms to be incentivised. I think for high, for speed for, um, you know, good customer service, all of that and good customer understanding all of those parts of consumer duty should really be the bits that insurers are incentivized as part of me outsourcers who are fixing issues on behalf of insurers, how they are incentivised.
That will not exist. Um, what is necessary is for firms to be incentivised. I think for high, for speed for, um, you know, good customer service, all of that and good customer understanding all of those parts of consumer duty should really be the bits that insurers are incentivized as part of me outsourcers who are fixing issues on behalf of insurers, how they are incentivised.
09:45
09:45
09:45
09:45
09:45
09:45
Speaker 4
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Speaker 4
Get because you can game it. Right. So, but I, I believe that there are a number of metrics, um, that would help consumers make informed decisions, um, around. Insurance to buy and which will allow good insurance firms to compete for, to show that they are providing good service in terms of claims. Sorry.
09:45
09:45
09:45
Speaker 4
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Speaker 4
Um, uh, I think claims is a good one. It only works if you're measuring everybody on the same basis. As I say. I think there are some that are more difficult. So in motor, for example, you might have insurance, the industry call it key to key time. So the time from when you hand over your car at a garage to when you get it back, is called the key to key time. But it's difficult to do that for home because if your house has been flooded, the likelihood is it's going to take a year in order to fix, uh, all of the issues, um, around drying out the house and redecorating.
It's generally takes nine months to a year in order to do that. So, uh. But I think claims, claims acceptance is a key one. I think there should be some level of customer satisfaction should be able to be measured. Um, and I understand that there are some groups out there that are seeking to, to do this more broadly across, across the sector, uh, and price comparison sites as well. Um.
It's generally takes nine months to a year in order to do that. So, uh. But I think claims, claims acceptance is a key one. I think there should be some level of customer satisfaction should be able to be measured. Um, and I understand that there are some groups out there that are seeking to, to do this more broadly across, across the sector, uh, and price comparison sites as well. Um.
09:45
09:45
09:45
Speaker 4
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Speaker 4
Um, I, as I said before, they, I think it becomes complex very quickly, uh, in terms of what those exclusions are. So you couldn't just put. Fence damage, for example, because it depends on the context of which defence has been damaged. And so, uh, I. Transparency is something that I think the regulator has tried a lot to, to use across all elements of financial services. What's been discovered is people don't read documents, uh, until they have to. And so.
Alone is insufficient to, to enable that, that information to get across. And so finding novel ways of, of increasing customer understanding, I think is one of those, one of the challenges that is, is, is an issue across all of financial services, not just insurance, but it is an issue here.
Alone is insufficient to, to enable that, that information to get across. And so finding novel ways of, of increasing customer understanding, I think is one of those, one of the challenges that is, is, is an issue across all of financial services, not just insurance, but it is an issue here.
09:45
Speaker 2
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Speaker 2
Excellent. That's been a really, really interesting session. Thank you very much for taking the time to share your rather unique perspectives of being on both sides of the fence. We found that really very valuable. So thank you very much. I call the meeting to a. Um, welcome to today's meeting, which is the first oral session as part of the committee's inquiry into the Regulation of Consumer Insurance market. And I thank you, Mr..
Um, welcome to today's meeting, which is the first oral session as part of the committee's inquiry into the Regulation of Consumer Insurance market. And I thank you, Mr. Scott, for attending. This session is open to the public. It's broadcast live and is subsequently accessible via the parliamentary website. A verbatim transcript will be taken of the evidence. And we'll put. It on the parliamentary website. Mr.. Mr.. Scott, would you like just to introduce yourself and your background?Your background?
Um, welcome to today's meeting, which is the first oral session as part of the committee's inquiry into the Regulation of Consumer Insurance market. And I thank you, Mr. Scott, for attending. This session is open to the public. It's broadcast live and is subsequently accessible via the parliamentary website. A verbatim transcript will be taken of the evidence. And we'll put. It on the parliamentary website. Mr.. Mr.. Scott, would you like just to introduce yourself and your background?Your background?
10:04
Speaker 7
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Speaker 7
Sir. Matt Scott, I'm the co-founder of Insurance Data Lab. Market intelligence firm for the insurance industry. My background originally was in Pensions world and. I work at Aon, retrained as an insurance journalist. And then yeah, set up this business around five six. Years ago, essentially to help provide kind of comparable digestible data on the performance of insurance companies.
10:04
10:04
Speaker 7
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Speaker 7
Yeah, sure. So I think kind of in home and travel, they're very mainstream markets, kind of over 8 billion of premiums now. And I think in terms of being able to go out and find the products, it's very easy to. You those kind of direct insurers, there's brokers and there's the price comparison websites understanding. That maybe there's a bit more work to do. I think, um, some consumers find at the point of claim. That maybe the policy they bought isn't necessarily what they thought they'd bought.
So they may not be understanding. Some of the definitions, some of the exclusions, you know, what is and isn't covered under the policy. And I think there's been a fair bit of work done by the industry to make that quote, process kind of quicker and easier. And maybe sometimes it's been, I suppose, sped up a bit too much. And maybe some of that explanation is lacking. As. A technical contract that's being entered into. And I think sometimes there could be maybe an argument for slowing that process down to help with understanding so people know more what they're buying.
So then when it comes to the point of claim, they know. What is and isn't covered by the policy.
So they may not be understanding. Some of the definitions, some of the exclusions, you know, what is and isn't covered under the policy. And I think there's been a fair bit of work done by the industry to make that quote, process kind of quicker and easier. And maybe sometimes it's been, I suppose, sped up a bit too much. And maybe some of that explanation is lacking. As. A technical contract that's being entered into. And I think sometimes there could be maybe an argument for slowing that process down to help with understanding so people know more what they're buying.
So then when it comes to the point of claim, they know. What is and isn't covered by the policy.
10:11
10:11
Speaker 7
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Speaker 7
I think of as explained in the right way. And I think that's the issue at the moment. I think if it's all hidden away in, you know, terms and conditions, people aren't going to see it. But for example, on a building's insurance policy where claims acceptance rates are really low, I think a lot of that is because people don't understand that things like storm damage are often excluded. They may be expected to be covered by the policy. If there's a storm and their fence gets blown down, for example.
And I think explaining that up front, that things like this are excluded from the policy and not covered, I think that could help them understand. So it's more the the cover and what isn't covered rather than the intricacies of, you know, the legal detail really.
And I think explaining that up front, that things like this are excluded from the policy and not covered, I think that could help them understand. So it's more the the cover and what isn't covered rather than the intricacies of, you know, the legal detail really.
10:12
10:12
10:12
Speaker 7
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Speaker 7
I think they definitely have helped. Um, it's made it a lot easier to compare policies on price primarily. Um, but so it's definitely helped with kind of people do that instead of having to go around, you know, all the different providers. But I think the issue is sometimes maybe there's a bit too much of a focus on price insurance is, is a grudge purchase really no one wants to buy it. And I think by making it easier to compare on price, um, that maybe drives a bit of a race to the bottom in terms of the premium being paid.
You do have things like the de facto ratings where you can see the, the breadth of the coverage to a certain degree with that five star rating. But there's nothing that, I suppose shows how the policy performs when it comes to actually being used around, you know, how claims are accepted, how good the insurer is at that part of the of the promise. And I think that's maybe somewhere where it has made it a bit of a price driven purchase, whereas really, you need to look more at the value of what is covered.
And I think some in recent years, things like the general insurance pricing practices has kind of fueled that a bit more. The introduction of some of the more, um, kind of almost value products whereby they're cheaper policies, but they have less, less coverage. I think that's maybe fuelled that a bit more. And people are more focused on the price, especially with premiums having gone up in the past. So that's maybe a bit of an issue there. Too much of a focus on price and less on the outcomes that are being delivered.
You do have things like the de facto ratings where you can see the, the breadth of the coverage to a certain degree with that five star rating. But there's nothing that, I suppose shows how the policy performs when it comes to actually being used around, you know, how claims are accepted, how good the insurer is at that part of the of the promise. And I think that's maybe somewhere where it has made it a bit of a price driven purchase, whereas really, you need to look more at the value of what is covered.
And I think some in recent years, things like the general insurance pricing practices has kind of fueled that a bit more. The introduction of some of the more, um, kind of almost value products whereby they're cheaper policies, but they have less, less coverage. I think that's maybe fuelled that a bit more. And people are more focused on the price, especially with premiums having gone up in the past. So that's maybe a bit of an issue there. Too much of a focus on price and less on the outcomes that are being delivered.
10:14
Speaker 5
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Speaker 5
Chairman, um, is there any information available to people considering buying insurance of the. Um, different degrees to which insurance companies make it easy or difficult to claim or resist claims and try and uh. Bore the claimant off, I should declare an interest. I'm on my wife on my behalf, just about to make a claim to insurance company, but we haven't yet done so. So we don't know whether we're going to be treated like that or not.
10:14
Speaker 7
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Speaker 7
Yeah. So I mean, the data's there, but it's not easy for a consumer to find really. So insurance data, we, for example, analyze claims acceptance rates to look at how many are accepted by insurer across different business lines, um, as well as other metrics. But it's not something that's publicly made available. It's something that I think maybe should be made available by the aggregators. Um, for example, you see it in some other markets, like in I think life insurance.
They say stuff like 99% of claims accepted. You don't tend to see that more in like the general insurance side of things, but I think it's something that could be made available and would definitely help. I mean, if you're comparing policies and you see one insurer accepts 90% and another 50%, then that's a, that's a big difference. And I think that's something that probably should be made available to the public. Thank you.
They say stuff like 99% of claims accepted. You don't tend to see that more in like the general insurance side of things, but I think it's something that could be made available and would definitely help. I mean, if you're comparing policies and you see one insurer accepts 90% and another 50%, then that's a, that's a big difference. And I think that's something that probably should be made available to the public. Thank you.
10:15
10:15
10:15
Speaker 7
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Speaker 7
Yeah. So, um, there's been a big focus on um kind of claims handling, um, with, you know, the witch super complaint with things like fair value assessments, consumer duty, it's become more under the spotlight. Um, and I think it's fair to say that the industry does have a, you know, a bit of a problem with public perception. Um, I think to a degree, unfairly degree warranted as well. Um, so I think sometimes it's kind of assumed that insurers maybe don't want to pay claims or they try and refuse them, they don't make that.
But I think that in the grand scheme of things, valid claims, they do want to pay. They want to pay them quickly because it's good for their business as well. It costs them less, essentially, if they're doing it in a quick way. But I think that that issue persists. I think they are monitoring it more so with the reporting that's come in under consumer duty and that kind of thing. There's definitely more of a spotlight on that. I don't think that is necessarily translated into an improvement in outcomes yet.
We're seeing some metrics improve. Um, but others maybe have actually worsened. So sorry, I just got some stats here in terms of the claims acceptance rates I spoke about earlier, since fair value came in in 2021, and the acceptance rate for travel insurance, for example, has gone up between 2 and 5%. So it's improved slightly.
But I think that in the grand scheme of things, valid claims, they do want to pay. They want to pay them quickly because it's good for their business as well. It costs them less, essentially, if they're doing it in a quick way. But I think that that issue persists. I think they are monitoring it more so with the reporting that's come in under consumer duty and that kind of thing. There's definitely more of a spotlight on that. I don't think that is necessarily translated into an improvement in outcomes yet.
We're seeing some metrics improve. Um, but others maybe have actually worsened. So sorry, I just got some stats here in terms of the claims acceptance rates I spoke about earlier, since fair value came in in 2021, and the acceptance rate for travel insurance, for example, has gone up between 2 and 5%. So it's improved slightly.
10:17
10:17
Speaker 7
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Speaker 7
Uh, 2 to 5%. Whereas in home insurance, those acceptance rates have gone down by 5 to 6, depending on what type of policy it is. And then since consumer duty came in in 2023, contents has improved by 11%, 11 percentage points. Whereas, um, kind of the other markets, sorry, travel insurance is flat to 6% improved as well. Whereas things like buildings insurance is down 9% and combined contents and buildings is down 6%. So those metrics have travel has improved.
The others have deteriorated a bit over that time. Maybe the exception of contents. Um, but we are seeing a large variation. So we're seeing that range in buildings insurance or home insurance from like 45% to 100%. So there's a lot of variation in that. So some companies have improved, others have declined a bit. Um, and then if you look at the complaints trends largely flat, there hasn't been a massive improvement. Maybe some have come slightly down.
Um, so I think minimal impact yet whether things will change going forward is hard to say because there has been that focus on it. And I think the other thing to look at is how it's the, I suppose the operational impact as well, um, has driven up costs quite a bit for, for a lot of insurance companies, particularly brokers. And I think, um, I've heard, you know, some instances where brokers have had to sell their business because the cost of regulations become too high. Fair value assessments, for example, you could see brokers doing, you know, thousands of assessments across the different insurers and products they sell.
And that has led to some reducing the number of insurers they work with as well. So there's been a bit of a negative there in terms of choice through some channels, which is bad for the consumer as well. Um, so that's kind of yeah, I think it's minimal positive impact on outcomes at the moment. Um, could still come, but I think, yeah, not quite come through yet.
The others have deteriorated a bit over that time. Maybe the exception of contents. Um, but we are seeing a large variation. So we're seeing that range in buildings insurance or home insurance from like 45% to 100%. So there's a lot of variation in that. So some companies have improved, others have declined a bit. Um, and then if you look at the complaints trends largely flat, there hasn't been a massive improvement. Maybe some have come slightly down.
Um, so I think minimal impact yet whether things will change going forward is hard to say because there has been that focus on it. And I think the other thing to look at is how it's the, I suppose the operational impact as well, um, has driven up costs quite a bit for, for a lot of insurance companies, particularly brokers. And I think, um, I've heard, you know, some instances where brokers have had to sell their business because the cost of regulations become too high. Fair value assessments, for example, you could see brokers doing, you know, thousands of assessments across the different insurers and products they sell.
And that has led to some reducing the number of insurers they work with as well. So there's been a bit of a negative there in terms of choice through some channels, which is bad for the consumer as well. Um, so that's kind of yeah, I think it's minimal positive impact on outcomes at the moment. Um, could still come, but I think, yeah, not quite come through yet.
10:19
Speaker 10
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Speaker 10
I raise one slightly more general question. Um, you very kindly provided a briefing and you started by quoting Peter Drucker and you raised the issue of the importance of culture and what struck. I mean, I knew Drucker and was on a company in America for 15 years. And Drucker was very closely involved with that. I think culture is absolutely critical. The question I was left with as I finished reading your briefing, was, to what extent are we dealing here with culture or regulation?Um, and to what extent through regulation are we trying to change culture?And if we were trying to change culture, are there different ways of doing it?
10:20
10:20
Speaker 10
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Speaker 10
I mean, for example, would you, we, for example, built a very strong relationship with Harvard Business School, and they did about ten case studies on us in the end. And members of staff at Harvard Business School wrote books on the subject and so on. And it does seem to me that you've opened the gates very wide in your briefing.
10:20
Speaker 7
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Speaker 7
So I think that we're seeing different responses in different companies, to be honest. And I have I've never worked in an insurance company, so I maybe can't comment too much, but I think from conversations I've had, you see some insurers who, you know, they engage very deeply with the Ombudsman, for example, the Financial Ombudsman Service, to really understand what those complaints are about, what the root cause of those was and were, and why the Ombudsman came to the decision. They did, particularly when they've been upheld in favour of the customer.
I think you see that a lot. You see a lot of companies who have really drilled down into their policy wordings and how they are read by people and how the claims journeys are managed as well, whereas others maybe have seen it as a bit more of a tick box exercise. So I think it is very much dependent on what the culture in that organisation was beforehand and how focused maybe they were on the customer before that, the regulations came into force in terms of changing culture.
I think trying to change culture by introducing rules, probably personal opinion isn't going to succeed with that. I think if your culture is against what the regulations are going to be trying to achieve, then you probably push back against that a bit, um, and maybe see that more as a tick box exercise. Whereas if you're more open to, to that, then you're going to embrace it a bit more and really see the benefits of it. Because I think that there are real benefits to be had from embracing these regulations and really focusing on the customer and what outcomes they're getting, because for one, it delivers a better service to your customers, which means they're going to be more loyal to you.
And we've seen that it also helps improve financial results as well. If you're offering a good customer service, then it does translate to better underwriting and better profits. So there's kind of a win win for those companies that do embrace it really.
I think you see that a lot. You see a lot of companies who have really drilled down into their policy wordings and how they are read by people and how the claims journeys are managed as well, whereas others maybe have seen it as a bit more of a tick box exercise. So I think it is very much dependent on what the culture in that organisation was beforehand and how focused maybe they were on the customer before that, the regulations came into force in terms of changing culture.
I think trying to change culture by introducing rules, probably personal opinion isn't going to succeed with that. I think if your culture is against what the regulations are going to be trying to achieve, then you probably push back against that a bit, um, and maybe see that more as a tick box exercise. Whereas if you're more open to, to that, then you're going to embrace it a bit more and really see the benefits of it. Because I think that there are real benefits to be had from embracing these regulations and really focusing on the customer and what outcomes they're getting, because for one, it delivers a better service to your customers, which means they're going to be more loyal to you.
And we've seen that it also helps improve financial results as well. If you're offering a good customer service, then it does translate to better underwriting and better profits. So there's kind of a win win for those companies that do embrace it really.
10:22
10:22
Speaker 12
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Speaker 12
Um. Let's stick with with the thought underlying Lord Griffiths. Um question if we may for a minute that. Can you can you just try to unpack for us the. Contribution. That you think regulation has. Made either to things getting better or to things getting worse. You you just now used an example of um. Insurance brokers and I forget precisely the point that you made. But you basically said, you know, a well intentioned piece of regulation was maybe having the effect of driving insurance brokers out of the market and therefore reducing the choice to a consumer who's becoming more and more dependent on comparison.
Where price is the main determinant, which then leads to massive churn, which is it's a pretty horrible model for everybody, it seems to me. I mean, no one is satisfied with the company providing the insurance has to build in the fact that, you know, the only thing people care about is price. Therefore, let's outsource everything. Let's. And you end up with something like airlines charging for, you know, everything. And everyone's pissed off because the overall experience is worse.
So how how do you see. The role of different bits of. Attempts to improve things over time through regulation. What do you think has worked and what do you think we should. You know, maybe you need to look again at from a regulatory point of view, because it's ended up not working in the way that one might have hoped.
Where price is the main determinant, which then leads to massive churn, which is it's a pretty horrible model for everybody, it seems to me. I mean, no one is satisfied with the company providing the insurance has to build in the fact that, you know, the only thing people care about is price. Therefore, let's outsource everything. Let's. And you end up with something like airlines charging for, you know, everything. And everyone's pissed off because the overall experience is worse.
So how how do you see. The role of different bits of. Attempts to improve things over time through regulation. What do you think has worked and what do you think we should. You know, maybe you need to look again at from a regulatory point of view, because it's ended up not working in the way that one might have hoped.
10:24
Speaker 7
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Speaker 7
Yes. I think the intention obviously, was to make things better. And clearly, you know, that's the case. I think some of the unintended consequences has been the increased cost for the broker community primarily. So, for example, having to get all the data from the insurers, which sometimes is hard to get there, may be unwilling to provide it. It's all in different provided in different formats, measuring metrics and different ways. Um, which means when you're working with, say, 20 insurers, you've got to go to each of those for each of the products you sell.
That's a lot of work. Whereas maybe if it was put more on the insurer whose kind of most cases developing that product and then selling it through the broker, that may be easier for them to achieve. They have all that data internally already, largely. So I think that that that is probably one issue. Um, I think as well, there was maybe. So when the rules were introduced, it was deliberately left so that there was interpretation as to how you adopted it, how you reported on it, how you measured the different outcomes.
And I'm of the belief that maybe there should have been maybe a bit more of a prescribed process around that, but more of a framework. And it's something that we're doing at Insurance Data Lab is creating kind of ingesting all this different data and creating a framework where brokers can, for example, go and assess their insurer partners much easier by having that data all in one place. So we look at kind of claims outcomes, the complaints process, and also kind of solvency and underwriting. And we've made that more comparable across the businesses.
And I think that without that prescription, that's something that's missing. And I think the issue then has been that if you can't compare properly across the different companies, then it's hard to know who's good and who's bad to a degree. And then when you don't know who's performing best and worst, then hard for those poorer performers to see, they need to improve and for it to drive up standards. So I think that's been one of the issues. And I think that's something that could be addressed by having a framework in place, in place.
So people can essentially compare apples with apples and know where needs to be improved. And then if you see that affecting things like business placement through brokers, that's when maybe those insurers who have embraced it as well and might start to sit up and take a bit more notice.
That's a lot of work. Whereas maybe if it was put more on the insurer whose kind of most cases developing that product and then selling it through the broker, that may be easier for them to achieve. They have all that data internally already, largely. So I think that that that is probably one issue. Um, I think as well, there was maybe. So when the rules were introduced, it was deliberately left so that there was interpretation as to how you adopted it, how you reported on it, how you measured the different outcomes.
And I'm of the belief that maybe there should have been maybe a bit more of a prescribed process around that, but more of a framework. And it's something that we're doing at Insurance Data Lab is creating kind of ingesting all this different data and creating a framework where brokers can, for example, go and assess their insurer partners much easier by having that data all in one place. So we look at kind of claims outcomes, the complaints process, and also kind of solvency and underwriting. And we've made that more comparable across the businesses.
And I think that without that prescription, that's something that's missing. And I think the issue then has been that if you can't compare properly across the different companies, then it's hard to know who's good and who's bad to a degree. And then when you don't know who's performing best and worst, then hard for those poorer performers to see, they need to improve and for it to drive up standards. So I think that's been one of the issues. And I think that's something that could be addressed by having a framework in place, in place.
So people can essentially compare apples with apples and know where needs to be improved. And then if you see that affecting things like business placement through brokers, that's when maybe those insurers who have embraced it as well and might start to sit up and take a bit more notice.
10:26
10:26
10:26
Speaker 12
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Speaker 12
Okay. And you're finally, if I may, your earlier. Point, which I think you've just touched on in your previous answer about um. It's there isn't. Readily available comparable data on claim. You know, performance in terms of dealing with claims. Um. You know, the percentage that are paid out and so on. What is preventing that information from being readily available?Because you would have thought perhaps from a market point of view, if you're an insurance company, part of your competitor, you know, you're competing in a.
Normal market, you're competing on price. You're also competing on service. And what I think you're saying really is that what has been happening is that the competition feels as though it's only really on price. So what's preventing them from saying X percent of all our claims are dealt with within and paid out because some of them do it?
Normal market, you're competing on price. You're also competing on service. And what I think you're saying really is that what has been happening is that the competition feels as though it's only really on price. So what's preventing them from saying X percent of all our claims are dealt with within and paid out because some of them do it?
10:28
Speaker 7
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Speaker 7
Yeah. So I think consumers are definitely more focused on price. I think brokers are more aware of the service element. Um, there is there is data available. So the regulator does publish things like claims acceptance rates. Um, you can get FCA complaints data as well. And then you can get data from the ombudsman. Not as much detail kind of publicly. I think the issue is it's all in different places.
It's all on different measures. And it takes a lot of time to go out and source it, compare it and draw your conclusions. A consumer is not going to do that. I don't think they're just going to go and see the price and pick maybe not the cheapest, but the cheapest from a brand that they've heard of. And if there's a well-known insurance company on their third place on the aggregators, they're probably going to go with that one. They may look at the de facto rating and see, you know, what level of cover it is, but they're not going to go out and go to the regulator's website for a different few different measures, and then go to the Ombudsman website and look at that.
And also some of the data isn't available. So the amount of time to settle a claim that is not readily available, it's not something that is needed to be reported on publicly. An insurer could decide to put that out there, but I haven't heard of any that do. I don't think. Um and then for brokers, again, it's they work with so many insurers. It's going out, finding that data and doing the comparison. It's a time issue, you know, there doing the regulation doesn't actually bring in any money.
I think that's the issue. Um it can help because if you're delivering a better service to your customer over the long run, it kind of will improve your business, but it doesn't bring it in, you know, through the door straight away. And I think that's the issue. And that's one of the reasons we do what we do is we bring that data together all in one place, and then we kind of sell it out to the industry. We've we've done the hard work for them type thing and yeah.
It's all on different measures. And it takes a lot of time to go out and source it, compare it and draw your conclusions. A consumer is not going to do that. I don't think they're just going to go and see the price and pick maybe not the cheapest, but the cheapest from a brand that they've heard of. And if there's a well-known insurance company on their third place on the aggregators, they're probably going to go with that one. They may look at the de facto rating and see, you know, what level of cover it is, but they're not going to go out and go to the regulator's website for a different few different measures, and then go to the Ombudsman website and look at that.
And also some of the data isn't available. So the amount of time to settle a claim that is not readily available, it's not something that is needed to be reported on publicly. An insurer could decide to put that out there, but I haven't heard of any that do. I don't think. Um and then for brokers, again, it's they work with so many insurers. It's going out, finding that data and doing the comparison. It's a time issue, you know, there doing the regulation doesn't actually bring in any money.
I think that's the issue. Um it can help because if you're delivering a better service to your customer over the long run, it kind of will improve your business, but it doesn't bring it in, you know, through the door straight away. And I think that's the issue. And that's one of the reasons we do what we do is we bring that data together all in one place, and then we kind of sell it out to the industry. We've we've done the hard work for them type thing and yeah.
10:30
10:30
10:31
Speaker 15
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Speaker 15
Yes. Continuing the theme of the role of regulation. The insurance market, we're just looking at travel and house. Um, is. I think there's a fundamental problem because people think of it and it's public face is that it's just a commodity that you go along and buy. But ultimately, when you look at the two ends of the process, the. Um. The, the underwriting, ultimately the, some underwriting inevitably involved. And the other end, you've got the inevitability of loss adjusting or claims handling.
Um, and essentially both of those processes are more of an art than a science. Um, and continuing the theme of art, regulating art is an extremely difficult thing to do. You, you couldn't have regulation setting out what constitutes a good picture. So do. Do you follow the logic of. That that there's a fundamental problem with regulating the market.
Um, and essentially both of those processes are more of an art than a science. Um, and continuing the theme of art, regulating art is an extremely difficult thing to do. You, you couldn't have regulation setting out what constitutes a good picture. So do. Do you follow the logic of. That that there's a fundamental problem with regulating the market.
10:32
Speaker 7
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Speaker 7
I think that well, maybe, yeah, there is a bit of art to it. I think the outcomes are very measurable. Um, so you can see what, what's being delivered to customers. And I think focusing on that is the right thing to do, which is what the regulation is doing. Um, I think if you were going to start kind of prescribing how something was underwritten and how it was priced, I think that would create further issues. I know, um, in America that can happen and it is a bit of a nightmare from what I've heard.
Um, I think it very much does need to focus on the outcomes. I think the issue is maybe been, there have been issues that you can see in the data. Um, so claims acceptance rates, for example, in home insurance ranging from 63 to 74%. That's quite low. Motor insurance is 99%, for example. Now, it is true that a car insurance policy is much easier to kind of understand and know what is and isn't included than in a home or buildings policy.
But I think when you see I mean some buildings policies as low as 45% of some insurers claims accepted, maybe that there should have been a bit more of a focus on that from the regulator's point of view, and finding out why that was the case, and maybe some more enforcement based on the metrics that are being measured. I think that hasn't really happened yet. I know the FCA did a review into outsourced claims handling last year, and they said they fed back to some insurers that were involved in that.
But I don't think there's I haven't really seen much kind of actual action in terms of I don't think any policies have been withdrawn that I've heard of, for example, for not delivering value in those fair value assessments came in which maybe when you're seeing those low acceptance rates, you could maybe question that a bit and why they're still being sold. If maybe over half of claims are denied, particularly on something like a buildings policy. Um, so I would maybe question the enforcement of it. I think it's looking at the right things, but maybe not being used in the right way.
Um, another example is, um, that FCA review saw that only 32% of storm damage claims were actually resulted in a settlement. So I think it was, you know, 45, 46% denied and 19% of customers walked away, probably because, you know, either it was complicated or they realised that they weren't actually covered for what they were trying to claim for. And I think that's an issue. When you see figures like that, more needs to be done. I think primarily on the understanding of that policy by the consumer.
I think we see a lot of issues at the claim stage where they're declined. That is the most common cause of complaint is a claim being declined, particularly in home and travel. And I think that is. It's not because insurers are denying valid claims. I think a lot of the time it's because they're not covered. And I think that's an issue with how the policies are sold. And I think that's where you can be more clear and it is more scientific.
You can go. Out and assess how your policy wordings have been understood, how clear they are, how transparent they are, that kind of thing.
Um, I think it very much does need to focus on the outcomes. I think the issue is maybe been, there have been issues that you can see in the data. Um, so claims acceptance rates, for example, in home insurance ranging from 63 to 74%. That's quite low. Motor insurance is 99%, for example. Now, it is true that a car insurance policy is much easier to kind of understand and know what is and isn't included than in a home or buildings policy.
But I think when you see I mean some buildings policies as low as 45% of some insurers claims accepted, maybe that there should have been a bit more of a focus on that from the regulator's point of view, and finding out why that was the case, and maybe some more enforcement based on the metrics that are being measured. I think that hasn't really happened yet. I know the FCA did a review into outsourced claims handling last year, and they said they fed back to some insurers that were involved in that.
But I don't think there's I haven't really seen much kind of actual action in terms of I don't think any policies have been withdrawn that I've heard of, for example, for not delivering value in those fair value assessments came in which maybe when you're seeing those low acceptance rates, you could maybe question that a bit and why they're still being sold. If maybe over half of claims are denied, particularly on something like a buildings policy. Um, so I would maybe question the enforcement of it. I think it's looking at the right things, but maybe not being used in the right way.
Um, another example is, um, that FCA review saw that only 32% of storm damage claims were actually resulted in a settlement. So I think it was, you know, 45, 46% denied and 19% of customers walked away, probably because, you know, either it was complicated or they realised that they weren't actually covered for what they were trying to claim for. And I think that's an issue. When you see figures like that, more needs to be done. I think primarily on the understanding of that policy by the consumer.
I think we see a lot of issues at the claim stage where they're declined. That is the most common cause of complaint is a claim being declined, particularly in home and travel. And I think that is. It's not because insurers are denying valid claims. I think a lot of the time it's because they're not covered. And I think that's an issue with how the policies are sold. And I think that's where you can be more clear and it is more scientific.
You can go. Out and assess how your policy wordings have been understood, how clear they are, how transparent they are, that kind of thing.
10:35
Speaker 15
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Speaker 15
Okay, I get, I, I get the importance of outcomes. The, the question though becomes what's the role of regulations in determining what the outcomes are?Now we've got regulations at the moment. Is, is it more that we don't have the right regulations that creates dissatisfaction in some markets, or is it that the regulations are there and they're not being enforced?
10:36
10:36
10:36
10:36
Speaker 7
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Speaker 7
I know that when they did the review last year, they said sorry in response to the which super complaint that they are looking at the issues raised in that um. In their ongoing consumer duty supervision, they have taken in a lot of data and it hasn't been in that long. So it could be that we will see that and have another issues. Um, the total loss issue that the regulator has been looking at premium finance, that kind of thing. I wouldn't be surprised if we saw something down the line.
So I'm not saying that maybe the regulator is is not doing the right job. It just could be that it's coming down the line. Yeah.
So I'm not saying that maybe the regulator is is not doing the right job. It just could be that it's coming down the line. Yeah.
10:37
10:37
10:37
Speaker 11
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Speaker 11
Um, I'm looking at the chart I think you have sent to us about um uphold rates. Now if they're going up, that sounds like a good thing. It may actually disguise some dysfunctional behavior. Now first of all, can you define when you talk about an acceptance rate, you apply and they pay out your money. That's an acceptance. Then they refuse you. You go to the Ombudsman, the Ombudsman reprieves you. And so they are paying first time round acceptance rates and then the acceptance which they have to do because they're upheld.
When you use acceptance, is it the total of the two or is it just the first?
When you use acceptance, is it the total of the two or is it just the first?
10:38
Speaker 7
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Speaker 7
Honest answer is I'm not sure. I believe it's it covers both. So if the claim has been accepted finally, then my understanding it would be covered under that. So 40% for example of of both the upheld rate is when the ombudsman finds in favour of the customer. And it's not necessarily about claims. Claims are the majority. I think it's around 80% in home and travel. Um but there are other things as well.
And it's just when the ombudsman finds in favour of the customer and against the insurer and the decision they made on whatever the complaint was, not necessarily the claim. And it could be that the complaints upheld, but the claim might not be paid in full, for example, and which kind of makes it a bit more of a grey area. So there are there are different things. And, um, a high upheld rate shows that the insurers, the ombudsman said that the insurers made the wrong decision.
The high rate.
And it's just when the ombudsman finds in favour of the customer and against the insurer and the decision they made on whatever the complaint was, not necessarily the claim. And it could be that the complaints upheld, but the claim might not be paid in full, for example, and which kind of makes it a bit more of a grey area. So there are there are different things. And, um, a high upheld rate shows that the insurers, the ombudsman said that the insurers made the wrong decision.
The high rate.
10:39
10:40
Speaker 7
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Speaker 7
It could do. I don't believe it's widespread. Um, I don't there is a perception that insurers want to deny claims, you know, speak to people on the street. And they generally think that's what insurers are there to do, refuse claims. I don't think that's the case. Um, every time a case goes to the ombudsman for example, it costs them more money. As a claim drags on. It costs them more. And just the operational cost of, you know.
Call centres handling that claim, that kind of thing. Um, but there is an issue that claims are being denied. I don't think it's the majority of the time that it's valid claims. I think a lot of the time it is that lack of understanding. I know it might sound a bit like a beating drum, but I think that insurers do want to play valid claims. Some there will be some that don't, and some may be have a threshold where they they are maybe a bit more, you know, trying to reject them, but I don't think that's a common common case.
Call centres handling that claim, that kind of thing. Um, but there is an issue that claims are being denied. I don't think it's the majority of the time that it's valid claims. I think a lot of the time it is that lack of understanding. I know it might sound a bit like a beating drum, but I think that insurers do want to play valid claims. Some there will be some that don't, and some may be have a threshold where they they are maybe a bit more, you know, trying to reject them, but I don't think that's a common common case.
10:42
Speaker 3
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Speaker 3
You are charged with going through an. Enclosed street. You complain they will never accept the complaint. They'll just say, take it to the tribunal. And let the tribunal sort this out. And that could be a valid commercial model. I mean, not not a nice commercial model, but I think you're saying you can't really prove whether that people have consciously chosen to be a bit tougher on claims than they used to be.
10:42
Speaker 12
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Speaker 12
Um, yeah, it's not something that I could say conclusively either way. To be honest. Um, I would say that claims acceptance rates are low in the home and travel markets in particular. Um, they, they have kind of gone down a bit or up a bit in some markets. It's not a marked change in recent years that I'd say they've got a lot worse. So I don't think it's in response to kind of the financial conditions that are in at the moment or anything like that.
Um, so I don't think I've seen a step change like that, but there could be some players doing that. Yeah.
Um, so I don't think I've seen a step change like that, but there could be some players doing that. Yeah.
10:43
Speaker 3
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Speaker 3
You point out that one of the problems may be that people have a poor understanding of what exactly they are buying when they buy it. They they may look at these terms and so on. Then you get to the renewal. Then you get a letter which says, we've reviewed our policies and we're making these changes. These changes, these changes. No idea really whether that is to your advantage or to their advantage. And I think they could slip through all sorts of things.
We used to play this, but we're not going to do so anymore. Not many people would spot it. So I think the the. Has got to be really on the ball to see what is actually happening now. Is the treatment at renewal as good as it was when you bought the policy for the first time?
We used to play this, but we're not going to do so anymore. Not many people would spot it. So I think the the. Has got to be really on the ball to see what is actually happening now. Is the treatment at renewal as good as it was when you bought the policy for the first time?
10:44
Speaker 12
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Speaker 12
I think we see. In the home market particularly, we see if you haven't had a claim, then a lot of the times, if the price seems fair then you will renew. There may be changes to the terms. I think the claims experience changes things. If you've made a claim and had a good experience, then probably more likely to stay even if your premium goes off a bit because of that claim. Whereas if it's a bad experience, obviously you're probably going to look elsewhere.
So I was speaking to someone the other day, for example, they had a flood in their house and um, they phoned up to make a claim and they were asking about it. They were looking through their policy documents and they were seeing for escape of water, the the excess was £500 rather than the £350 excess they'd kind of bought with the policy, which is pretty standard. And they were aware of that and they were fine with that. But what they didn't know was that that excess excess applied to every single room in the house that was affected by the flood.
So there are four rooms. That's an excess then of £2,000. It cost them less than that to put it right himself. So he didn't make a claim. He's already decided he's not going to that insurer again. Now in under the terms of the policy that's what the rules are. But he wasn't aware of that. And there may be an argument whether that's fair or not. He bought it. That's what he bought.
So the insurer would argue he should have been aware of it. But maybe that because of that lack of understanding, it obviously wasn't made clear enough for him. Other people may have known, but I think there are issues like that where you people don't know what they're buying. And I think that's a real issue.
So I was speaking to someone the other day, for example, they had a flood in their house and um, they phoned up to make a claim and they were asking about it. They were looking through their policy documents and they were seeing for escape of water, the the excess was £500 rather than the £350 excess they'd kind of bought with the policy, which is pretty standard. And they were aware of that and they were fine with that. But what they didn't know was that that excess excess applied to every single room in the house that was affected by the flood.
So there are four rooms. That's an excess then of £2,000. It cost them less than that to put it right himself. So he didn't make a claim. He's already decided he's not going to that insurer again. Now in under the terms of the policy that's what the rules are. But he wasn't aware of that. And there may be an argument whether that's fair or not. He bought it. That's what he bought.
So the insurer would argue he should have been aware of it. But maybe that because of that lack of understanding, it obviously wasn't made clear enough for him. Other people may have known, but I think there are issues like that where you people don't know what they're buying. And I think that's a real issue.
10:46
Speaker 3
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Speaker 3
I think although it's not, I'm not sure it's really within our terms of reference. I think there is another abuse going on which is at renewal. You buy a policy and then next year they say it's gone up by 20%. And I say my income has gone up by 4%. Um, and you haggle with them and they bring it back down. Are they treating. Is that behaviour consistent with treating customers with respect and integrity and so on.
If basically the renewal premium is a try on and they see who just buys it and they see who resists it, because I find a lot of cases. I keep dodging. After about 2 or 3 years, I change to someone else, and then that pattern repeats itself. And I go back possibly to the first one.
If basically the renewal premium is a try on and they see who just buys it and they see who resists it, because I find a lot of cases. I keep dodging. After about 2 or 3 years, I change to someone else, and then that pattern repeats itself. And I go back possibly to the first one.
10:47
Speaker 12
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Speaker 12
So there used to be the case where, um, maybe more in the motor market predominantly, but in your home as well, where um, kind of new customer prices were a lot cheaper than renewals, just as standard. And that the idea was that you'd bring in that new customer, and then you'd put up the premiums at renewal, almost like a loss leader in that first year. And then after that, you'd get your money back. But I can't remember what it was. But rules were introduced to stop that.
You can offer different premiums now to for new business and renewals, but you still do get that, I suppose, negotiation at renewal with some providers, some um, just flat refuse that. It's just that's the price. But you do get some providers where you can phone up and see if you can get a better deal. Um.
You can offer different premiums now to for new business and renewals, but you still do get that, I suppose, negotiation at renewal with some providers, some um, just flat refuse that. It's just that's the price. But you do get some providers where you can phone up and see if you can get a better deal. Um.
10:48
10:49
Speaker 12
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Speaker 12
So in those instances, I imagine that the new business would have been sold at the same price. That's what it should be. Um the other thing would be is if that policy being sold at renewal is no longer available, in which case then it's not available to new customers. So the pricing rules wouldn't apply because the same policy isn't being sold. So it could be there's been changes of terms that have been brought in for new policies. That means that the policy that's being renewed no longer exists.
New customers, for example.
New customers, for example.
10:49
10:49
Speaker 1
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Speaker 1
Yes, I'm just sort of thinking about we've already discussed that checking. What's in and what's out and those kinds of things. Um, is important and, and has the focus on price and the use of, um, you know, websites for comparison meant that. It's all too much of a package. And so, you know, you tick the boxes and you get a price at the end or whatever, rather than there being a bit more interrogation so that the customer can appreciate that some of the add ons that look trivial are actually the things that are boosting the price quite a lot.
Um, and um. Certainly with the advent of, of AI, there must be much more opportunity to, to iterate round and the fact that, you know, maybe they've hiked up the contents insurance or everything's got a bit old and faded and you didn't need that then, um. I mean, how much is that looked at?Or is, has, has this sort of comparison and pricing squeezed out those kinds of, um, presentations?
Um, and um. Certainly with the advent of, of AI, there must be much more opportunity to, to iterate round and the fact that, you know, maybe they've hiked up the contents insurance or everything's got a bit old and faded and you didn't need that then, um. I mean, how much is that looked at?Or is, has, has this sort of comparison and pricing squeezed out those kinds of, um, presentations?
10:50
Speaker 12
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Speaker 12
Yes. I think that we, we have seen, um, I think, yeah, similarly, it does make an issue because it makes it all about the price. And I think some things that maybe you expect to be included are now an add on in order to get that initial price seem cheaper. And some things that a consumer might expect to be included as standard now isn't and needs to be bought as an extra part of the policy. You see that predominantly with like the value products, whereby it's the minimum level of cover that you can buy really.
Um, and it's at a much lower price. Um, you do have an underinsurance problem, for example, in the home insurance market where people don't know the rebuild value of their house, for example. So, and how can they be expected to. So that's not covered. The value of contents is often a lot higher than what people expect. So they're not buying enough cover there. And that's an issue. And I think again, for example, if your house burnt down and you didn't have enough cover, then they won't pay out the full amount.
They'll only pay out percentage based on what was covered by the policy, for example. And I think that that's an issue that you see in the market there has been driven by the price comparison websites. I do think they have helped and that it makes it a lot easier to buy a policy now. But I think probably more work needs to be done. On the understanding with the question sets, for example, there's been a lot of work done to reduce the number, and in some cases that's great if you can get the data from, you know, a previous login, for example, where you've shared details of your house, um, or if there's, you know, certain motor insurance, there's different data sets that they can plug into to get data around your driving history, for example.
That's great for reducing the, the question set. But I think when it comes to levels of cover, maybe that's been pared back a bit too much and more time needs to be taken, which makes it a bit more of a a longer journey for the consumer, but one that delivers more value and would ultimately deliver more outcomes. I would say the issue with that is most people don't make a claim on their policy every year. So you're making the experience worse from the majority.
But to deliver the value to those customers who actually use the products. And that's the, I suppose, the line that's got to be walked on. The balancing point there is finding the right the right level.
Um, and it's at a much lower price. Um, you do have an underinsurance problem, for example, in the home insurance market where people don't know the rebuild value of their house, for example. So, and how can they be expected to. So that's not covered. The value of contents is often a lot higher than what people expect. So they're not buying enough cover there. And that's an issue. And I think again, for example, if your house burnt down and you didn't have enough cover, then they won't pay out the full amount.
They'll only pay out percentage based on what was covered by the policy, for example. And I think that that's an issue that you see in the market there has been driven by the price comparison websites. I do think they have helped and that it makes it a lot easier to buy a policy now. But I think probably more work needs to be done. On the understanding with the question sets, for example, there's been a lot of work done to reduce the number, and in some cases that's great if you can get the data from, you know, a previous login, for example, where you've shared details of your house, um, or if there's, you know, certain motor insurance, there's different data sets that they can plug into to get data around your driving history, for example.
That's great for reducing the, the question set. But I think when it comes to levels of cover, maybe that's been pared back a bit too much and more time needs to be taken, which makes it a bit more of a a longer journey for the consumer, but one that delivers more value and would ultimately deliver more outcomes. I would say the issue with that is most people don't make a claim on their policy every year. So you're making the experience worse from the majority.
But to deliver the value to those customers who actually use the products. And that's the, I suppose, the line that's got to be walked on. The balancing point there is finding the right the right level.
10:53
Speaker 1
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Speaker 1
Right. So and I mean, let's switch over to travel insurance as a change. Um, I mean, is that adequately subdivided if you because of course, if you're going on holiday, your, your, your travel company is going to say, if you're going abroad, you know, you want to see that you've got travel insurance. Um, so everybody sort of starts looking at that quite early on. Um, but a big part of the cost is actually cancellation insurance and, and is the consumer aware of that?Um, especially if they've got medical conditions and things that, that the cost, if you take the insurance out close to your departure date may well be a whole lot cheaper than if you take it out.
When you first thought about booking and, um, I don't recall that ever being flagged up. Um, anywhere.
When you first thought about booking and, um, I don't recall that ever being flagged up. Um, anywhere.
10:53
Speaker 12
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Speaker 12
Yes. So, um, I think with people with kind of pre-existing medical conditions, I think a lot of the standard products understandably aren't right for them. So they're more likely to go through a broker who understands the process a bit more and can help them with that. It's very specialist providers who cover that. Um, there may be is an issue still though with consumer understanding. So I've heard of cases whereby, for example, someone's had a pre-existing cancer diagnosis. That's they're in remission.
It's um, they've been given the all clear and they're covered to travel for anything related to that. If there was a recurrence or a related illness, and then they go between taking up the insurance and going on holiday, they um, are called to the doctor for a test. And then they phone up their broker to tell them, the broker says, okay, we have to take that condition off cover now. And then if you go on holiday, you won't be able to make a claim because of that.
But we can, you know, if you were to cancel because of it, you would be covered. And I think there's issues there that maybe there's not understanding how the policy works in terms of that. I think cancellation covers important. Um, you know, you could fall ill or injured in the UK before you go abroad. There's a longer period of time. It's probably more likely occurrence that that would happen. So I think it's an important part of it.
And I can maybe understand why it is a bit more expensive. I think some of the large costs with um. Overseas claims around kind of overseas medical costs or repatriation, they can be huge. Um but rare. So I think that's baked into the price as well. But I think again, people need to understand how these policies work. And I think it's probably not, it's probably fair to say they don't always understand it, particularly in those fringe cases, which maybe makes broker advice more important.
For example.
It's um, they've been given the all clear and they're covered to travel for anything related to that. If there was a recurrence or a related illness, and then they go between taking up the insurance and going on holiday, they um, are called to the doctor for a test. And then they phone up their broker to tell them, the broker says, okay, we have to take that condition off cover now. And then if you go on holiday, you won't be able to make a claim because of that.
But we can, you know, if you were to cancel because of it, you would be covered. And I think there's issues there that maybe there's not understanding how the policy works in terms of that. I think cancellation covers important. Um, you know, you could fall ill or injured in the UK before you go abroad. There's a longer period of time. It's probably more likely occurrence that that would happen. So I think it's an important part of it.
And I can maybe understand why it is a bit more expensive. I think some of the large costs with um. Overseas claims around kind of overseas medical costs or repatriation, they can be huge. Um but rare. So I think that's baked into the price as well. But I think again, people need to understand how these policies work. And I think it's probably not, it's probably fair to say they don't always understand it, particularly in those fringe cases, which maybe makes broker advice more important.
For example.
10:56
Speaker 1
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Speaker 1
I mean, I do remember doing some calculations once and worked out that the the quote for the insurance was higher than the cost of hiring an air. To get home. So I didn't take it out. Um, so yeah, I mean, I just think that, you know, it isn't flagged at all. And some people are not necessarily recognising take out the medical conditions thing. Just, just how much is the cancellation cost versus the travel cover cost?And, um, you know, there should be, I think a bit more clarity around that because people are probably paying more than they need in some instances, because they could, um, you know, delay their booking or something.
10:57
10:57
10:57
Speaker 6
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Speaker 6
First I declare an interest as a non-executive director of Unity Trust Bank. Um, if I'm interested in. Let's take it from the view of the insurance company for a moment. I want to price a policy. So I look at the probability of claims. Which is I get from historical data. I then take out a section which would be fraud, which was also from historical data. And I then put in my refusal rate.
Okay. And then I can price the policy. So the refusal rate is part of the business model. Would you agree?
Okay. And then I can price the policy. So the refusal rate is part of the business model. Would you agree?
10:58
Speaker 12
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Speaker 12
I'll be honest and say I, I don't know the intricacies of pricing and policy. Um, I wasn't aware that a refusal rate was built into that. I would have thought if the claim was valid, then that would have been assumed to have been paid. So I wouldn't like to comment if something that's taking place, I wouldn't know.
10:58
Speaker 6
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Speaker 6
Okay. Thank you. The other thing I've been puzzling about motor insurance where everybody says, oh, it's 99% acceptance and so on and so forth. Now, the peculiarity of motor insurance is that many of the terms are enforced by law. You are required by law to have these particular terms. And therefore you have a particularly strict form of regulation, which is resulting in a 99% acceptance rate. And or is associated with not resulting in resulting in going too far is associated with the 99% acceptance rate.
So perhaps the problem with insurance general generally is that it's under regulated compared in terms of household travel and so on, compared to motor insurance, which is very tightly regulated in several of its characteristics. Not all, of course, but several of its characteristics. Does that is that a credible story?Do you think.
So perhaps the problem with insurance general generally is that it's under regulated compared in terms of household travel and so on, compared to motor insurance, which is very tightly regulated in several of its characteristics. Not all, of course, but several of its characteristics. Does that is that a credible story?Do you think.
10:59
Speaker 12
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Speaker 12
I'd probably say it's more to do with the complexities of the risk. So if you compare home kind of buildings insurance, for example, there's probably one of the conditions of a policy generally is that you have to maintain, for example, the state of your roof if your roof is blown off and it was maintained, then it's covered. If it wasn't maintained, then it's not. That's a pretty standard term in car insurance. I wouldn't say you have that similar type of instance.
11:00
11:00
Speaker 12
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Speaker 12
Well, that's, that's the gray area I suppose. And I think that that's where the issue lies in that market is that there are instances where someone will think they're covered and the insurer would say they're not, because maybe their roof is in a poor state of repair, and that there may have been an issue there already, um, how they get to that, I don't know, I'll be honest. Whereas with the car, if you've crashed your car, it's pretty obvious you've crashed your car. Um, it's a bit less clear.
And then you also have things where there's an exclusion. So storm damage, as I was saying earlier, of that 32%, that's a big one. People think it's covered and it's not. So if you're going to make a claim the insurer could deny it because for a valid reason, you're not covered under your policy. That's reported as a denied claim in car insurance. I mean, leaving your keys in the ignition, someone stealing it would be one example where you're probably not covered.
In other instances, there's less. I suppose instances where I'm, I can think of other examples where that may, may be something where you're not covered, where they're much more apparent in, um, in home and contents contents insurance, often accidental damage is an additional buy on that people may add on that people may think they have when they don't. Um, laptops are often excluded if they're over a certain amount of value. High value products can often be excluded under typical policy. So there's much more caveats and exclusions that come under that.
Also the FCA picked up, you know, what defines a storm. That can be something as well that that comes into a policy for storm damage. And I think there's more, um, areas for discussion about what is and isn't covered under those policies. So I don't think it's a case of more regulation would sort that. Um, unless you get into the minutiae of different, you know, legislating what the definitions are, which I think would be too restrictive. So I think it's more a difference in the type of risk being covered rather than the level of regulation.
And then you also have things where there's an exclusion. So storm damage, as I was saying earlier, of that 32%, that's a big one. People think it's covered and it's not. So if you're going to make a claim the insurer could deny it because for a valid reason, you're not covered under your policy. That's reported as a denied claim in car insurance. I mean, leaving your keys in the ignition, someone stealing it would be one example where you're probably not covered.
In other instances, there's less. I suppose instances where I'm, I can think of other examples where that may, may be something where you're not covered, where they're much more apparent in, um, in home and contents contents insurance, often accidental damage is an additional buy on that people may add on that people may think they have when they don't. Um, laptops are often excluded if they're over a certain amount of value. High value products can often be excluded under typical policy. So there's much more caveats and exclusions that come under that.
Also the FCA picked up, you know, what defines a storm. That can be something as well that that comes into a policy for storm damage. And I think there's more, um, areas for discussion about what is and isn't covered under those policies. So I don't think it's a case of more regulation would sort that. Um, unless you get into the minutiae of different, you know, legislating what the definitions are, which I think would be too restrictive. So I think it's more a difference in the type of risk being covered rather than the level of regulation.
11:02
11:03
11:03
Speaker 16
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Speaker 16
You've said on a number of occasions that um. The customer needs to understand. And to be able to have enough information to make an informed decision. So the point of. Taking an insurance policy out is largely driven. You have made the point by cost. Is there a requirement to provide a minimum of information about what is covered?What is not covered, or because it would appear from your comments that it's only when somebody makes a claim that the full cover or non lack of cover becomes apparent.
11:03
11:03
11:04
Speaker 12
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Speaker 12
Yeah. And I think I think that's the issue with the work that's gone into speeding up the process. There's, there could should be certain instances within the quote journey where those exclusions are made clear rather than read these key documents or terms and conditions, where it's, where it's, um, disclosed what is and isn't covered. I would argue that it would be much better for everyone if there was. This is covered. This isn't covered. Just very clear.
Before you go and buy on the web page instead of in the documents themselves.
Before you go and buy on the web page instead of in the documents themselves.
11:05
11:05
11:05
11:05
Speaker 12
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Speaker 12
I wouldn't say that's probably a commonplace, um, term. It's something I've heard of. Um, and I think that's why there is the perception issue of the industry. People saying they're trying to deny claims because something like that made that there's no point in that person making a claim because it would cost him more than the cost of repair is less than the excess.
11:06
Speaker 16
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Speaker 16
So we need more information on the front page. And that information should also include claim acceptance rates, but also the speed of expectations. Because it seems to me, one of the challenges that insurance the insured has is they. Has happened. They need money quite quickly to pay for it. Therefore, the pressure is on to settle. Whereas the speed of settlement can be very prolonged. And is it not the case that most insurance companies.
Now in fact, outsource claims?And so you get into a long journey with people trailing different parts of the world on call centres to find out what's going on, what's not going on. So the information about how much, what the claim acceptance rate is, and the time to settle is, again, critical information.
Now in fact, outsource claims?And so you get into a long journey with people trailing different parts of the world on call centres to find out what's going on, what's not going on. So the information about how much, what the claim acceptance rate is, and the time to settle is, again, critical information.
11:07
Speaker 12
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Speaker 12
Yeah, I'd agree with that wholeheartedly. I think that should be something that consumers should be aware of. Um, and I think particularly in the buildings insurance, those delays are a real issue. Um, so, um, kind of across home and travel, it's 18% of ombudsman complaints are about delays to a claim. And that's not just claims complaints. That's all complaints in buildings insurance. Those delays are 23%. It's more than double kind of contents insurance and travel.
I think that's a big issue.
I think that's a big issue.
11:08
Speaker 16
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Speaker 16
I made the point that the law, um, actually deals with a lot of what has to be covered for motor insurance. It would seem to me a similar arrangement exists with a lot of houses, because the provider of mortgage finance, which has a keen interest to know what is covered and what is not going do. Mortgage suppliers, providers require. To see the insurance cover what is covered, what is not, because that presumably goes to the heart of whether the value of their mortgage is, is, is, is whole or not.
11:08
Speaker 12
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Speaker 12
I believe there's a requirement to have buildings insurance cover the cost of rebuilding the property. If it was burnt down, for example. But I've never heard of that being required to be shown to the mortgage provider. No. And whether I'd imagine that in a lot of cases, properties are underinsured because people often underestimate what it would cost to rebuild the policy, particularly with, um, you know, price of labour and materials having gone up so much lately. So I think that probably is a big issue.
Um, I think there are, I could be wrong, but I think there is legislation around minimum, minimum levels of kind of liability cover, for example, under some home insurance policies, but I wouldn't know for sure. But I don't think there is around rebuild that kind of thing. Yeah.
Um, I think there are, I could be wrong, but I think there is legislation around minimum, minimum levels of kind of liability cover, for example, under some home insurance policies, but I wouldn't know for sure. But I don't think there is around rebuild that kind of thing. Yeah.
11:09
Speaker 5
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Speaker 5
I just follow up on that point because we've been. The questions compared motor with housing, for example. A big factor in the motor insurance is the no claims discount. But you don't get that in housing, I don't think um. So what impact does that have on claims rates. I know I've more than once had a valid claim, but I don't pursue it because I don't want to lose my no claim discount.
11:09
Speaker 12
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Speaker 12
Yes. So technically, even if you don't claim if you have an accident, you should say to the insurer. But um, yeah, I think in home insurance, the impact of historic claims is less than in motor. If you're having frequent car accidents, you probably means that you're more likely to have one in the future. It's less marked in, in home insurance, my understanding, which is why there's not the no claims discount. Um, but I could be wrong on that.
But I think that's why it's introduced in motor insurance and rather than the other markets.
But I think that's why it's introduced in motor insurance and rather than the other markets.
11:10
11:10
11:10
11:10
11:11
Speaker 12
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Speaker 12
That's the tricky question. I'd say there has been minimal improvements as a result of it. I spoke about the claims acceptance rates earlier, and I think improved slightly in some markets, but got worse in others. So it would question what impact that's had. I think it has helped the industry focus on it more. And I think the insurers that are. Embracing the the culture behind it and embedding it in the organisation have improved. Um, and you do see some improvements in those markets in terms of the claims acceptance rates.
On the other hand, you do see rates going down for some providers in all markets. So for example, if you take those claims acceptance rates, there's a big variation um in the market. So for example, in home insurance buildings, you see claims acceptance rates between 45% and 85% across different providers. In content insurance, it's 60 to 90. Um, for combined policies, 55 to 100. And then in travel insurance, again, 55 to 100%. So you do see insurers have very high upheld rates that are in line with, you know, other lines such as motor insurance.
I think the issue is at the other end of the market, where you have those providers who are denying such a large level of claims. Um, I think I don't know, but I would my gut feel would be that the providers that maybe haven't engaged with the regulations as much and maybe have seen it more of a tick box exercise where they're reporting on it, but aren't necessarily looking into the. Issues. That would probably be my guess. Um, in terms of what to do about it, I think, I think we will see from the regulator more action coming down the line.
I know in response to the which super complaint they were saying they were dealing with those issues as part of their ongoing oversight. And I think we'll see something on that at some point. I would be very surprised if we didn't. And I think the issue is there needs to be enforcement action for changes to be made. I think that's when you'll start to see those changes from those poor performers. I think a lot of people have improved, but there's some dragging down the market.
On the other hand, you do see rates going down for some providers in all markets. So for example, if you take those claims acceptance rates, there's a big variation um in the market. So for example, in home insurance buildings, you see claims acceptance rates between 45% and 85% across different providers. In content insurance, it's 60 to 90. Um, for combined policies, 55 to 100. And then in travel insurance, again, 55 to 100%. So you do see insurers have very high upheld rates that are in line with, you know, other lines such as motor insurance.
I think the issue is at the other end of the market, where you have those providers who are denying such a large level of claims. Um, I think I don't know, but I would my gut feel would be that the providers that maybe haven't engaged with the regulations as much and maybe have seen it more of a tick box exercise where they're reporting on it, but aren't necessarily looking into the. Issues. That would probably be my guess. Um, in terms of what to do about it, I think, I think we will see from the regulator more action coming down the line.
I know in response to the which super complaint they were saying they were dealing with those issues as part of their ongoing oversight. And I think we'll see something on that at some point. I would be very surprised if we didn't. And I think the issue is there needs to be enforcement action for changes to be made. I think that's when you'll start to see those changes from those poor performers. I think a lot of people have improved, but there's some dragging down the market.
11:13
11:13
11:14
Speaker 12
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Speaker 12
I think again, it comes down to the a lot of it is down to buildings claims. Um, and I think the issue is there around again, I know I'm saying it again, but the understanding people just don't know what is and isn't covered. And I think it's on the industry to make that clearer and improve that. I think that is a large issue. Lots of things that you maybe, maybe consumer would expect to be covered under a policy as. It isn't under a lot of the policies that are available.
I think that's the issue.
I think that's the issue.
11:14
11:15
11:15
Speaker 4
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Speaker 4
Could you just say something briefly on. The role that, outsourcing of claims management you think has had. Because you would guess, I don't know, perhaps you do that the kind of contractual relationship that the insurer might have with the claims manager. Would probably have performance targets around, you know, volume of payouts. Speed what have you what how does that all work?
11:15
Speaker 12
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Speaker 12
So I think it's often very convoluted chain. So you have lots of different people involved. That makes the management hard. Um the FCA review they did last year said there were issues with oversight and a lack of information coming from those third party providers to the insurer. And maybe there should be a closer eye being kept on how they are performing. I think a lot of the issue comes down to communication, buildings, insurance. For example, if you have a repair to a house, it can be quite a long process.
Delays are inevitably going to happen if jobs overrun, further issues are discovered. I think a lot of the issues come from a lack of communication from the insurer, and that probably stems because there are so many people in the chain. Um, there are benefits to, I suppose, outsourcing it to professionals who, you know, they have the economies of scale, they have the experts in place instead of an insurer, particularly the smaller ones, keeping them on hand themselves. I think the issue is around the oversight and the complexity of those supply chains probably come more to the fore in recent years, with the issues we've seen around labour shortages and the increased cost of parts can make claims more complex and more hard to manage.
Um, but I think what the FCA was saying there should have been better oversight in some circumstances.
Delays are inevitably going to happen if jobs overrun, further issues are discovered. I think a lot of the issues come from a lack of communication from the insurer, and that probably stems because there are so many people in the chain. Um, there are benefits to, I suppose, outsourcing it to professionals who, you know, they have the economies of scale, they have the experts in place instead of an insurer, particularly the smaller ones, keeping them on hand themselves. I think the issue is around the oversight and the complexity of those supply chains probably come more to the fore in recent years, with the issues we've seen around labour shortages and the increased cost of parts can make claims more complex and more hard to manage.
Um, but I think what the FCA was saying there should have been better oversight in some circumstances.
11:17
11:17
11:17
11:17
11:17
Speaker 2
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Speaker 2
Yes. Can I ask?It's now three years since a consumer duty was introduced. And I just wonder if you have any evidence. I mean, some chief executives might have said we're going to do a thorough review of our business and see if we can't improve it in line with it. Demands of the consumer duty. Others may have said, you know, unless it's going to be regulation, frankly, this is just more noise from the regulators. And I just wonder, do you have any evidence at all of the scale of different responses?
11:18
11:18
Speaker 2
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Speaker 2
Well, I mean, to what extent have you found companies saying, yes, we're going to take the consumer duties seriously?And we, the way we do our business, the way we treat customers, the way we produce information and so on, we're doing a thorough, you know, three. 60 degree review. What are we doing?Other companies may say this is just more sort of garbage from the regulators. And frankly, we can pass. I mean, why do you have any evidence of the response.
11:19
Speaker 12
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Speaker 12
Not really. I mean, anecdotally, the majority of the insurers I'd spoken to say they're embracing the, um, the regulations and have put things in place to help with the monitoring and reporting. There will be players who do see it more as a headache rather than a benefit, but I think the majority are embracing it and or at least saying they I think there may be from from what we've seen, there are certain players who are pulling down the market, the averages and the positions in different markets.
Um, I think the majority have embraced it and we have seen some improvements. I just think it's the it's the poor performers that are maybe disproportionately affecting outcomes a bit. Thank you.
Um, I think the majority have embraced it and we have seen some improvements. I just think it's the it's the poor performers that are maybe disproportionately affecting outcomes a bit. Thank you.
11:19
Speaker 7
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Speaker 7
All right. Before I draw this session to a close, I omitted to declare my interest at the beginning, having exhausted my colleagues to do so earlier. I then forgot my own. I have shares in listed financial services companies, including insurers, as recorded in the Register of Interests. Uh, with that, um, Mr. Scott, I'd like to thank you very much for this evidence session. It's full of fascinating insights, and I thank you very much for taking the time to come and talk to us today.
11:20
11:20
Speaker 7
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Speaker 7
To the second part of today's meeting, which is the second oral evidence session as part of the committee's inquiry into the regulation of the consumer insurance market. And I thank you very much to Mr. Bruce for attending. The session is open to the public. It's broadcast and is subsequently available, available via the parliamentary website. A verbatim transcript will be taken of the evidence and will be put onto the parliamentary website. So, Mr. Bruce, if you could just, um, welcome very, very much to the session, if you could just explain your background and then we'll then we'll move on to questions.
11:21
Speaker 9
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Speaker 9
Thank you for having me. Uh, yes. Matthew Bruce, uh, for the last six months, I've been a partner in risk and regulation at KPMG. Prior to that, for five years, I was director of insurance at the FCA. So responsible for the supervision of 6000 or so insurers and brokers operating in the UK. And prior to that, I spent 15 years at the Bank of England and five years as Andrew Bailey as chief of staff when he was head of the FCA.
11:21
Speaker 7
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Speaker 7
Um. Thank you. So you bring a very special perspective to our inquiry. I think what I'd like to do is, is invite you to give us an overview of how regulation fits into the, the various players in the insurance sectors that we're looking at, which is home and insurance. And so the insurers and other players, including brokers and other intermediaries.
11:22
11:22
Speaker 9
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Speaker 9
So insurers are regulated by both the Bank of England through the PRA and from the FCA in terms of conduct of business, brokers are solely regulated for prudential and conduct reasons. Um by the by the FCA. And so all of that is set out initially in Fisma. Uh, and that's the basis for all financial services regulation in the UK. We didn't have the various sourcebooks. Uh, so Acbs is the main insurance one, uh, that sets the rules as to how insurers should operate.
And then the consumer duty, which the, as was talked about in the last session, the main powers and principles for regulation sits on top of that. Uh, and it's through that, that, uh, my, my old team would regulate the insurance sector, um, through all parts of the process. So from understanding the price and value for the products that were sold, what was sold, uh, how customers were supported and how they understood the products that were, that were sold. Elsewhere within the FCA would be the enforcement area.
So, uh, there would be a various elements of how firms are supervised, but where things, uh, go very wrong. Enforcement is where it is. The final part of that, where, uh, the powers that the FCA would have to, to investigate.
And then the consumer duty, which the, as was talked about in the last session, the main powers and principles for regulation sits on top of that. Uh, and it's through that, that, uh, my, my old team would regulate the insurance sector, um, through all parts of the process. So from understanding the price and value for the products that were sold, what was sold, uh, how customers were supported and how they understood the products that were, that were sold. Elsewhere within the FCA would be the enforcement area.
So, uh, there would be a various elements of how firms are supervised, but where things, uh, go very wrong. Enforcement is where it is. The final part of that, where, uh, the powers that the FCA would have to, to investigate.
11:23
11:23
11:23
11:23
Speaker 9
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Speaker 9
So as I mentioned, there is between 5 and 6000 firms, and the insurance area of the FCA is approximately 100 people. So that ranges from large multinational insurers. Who are regulated to individual insurance brokers operating from their own homes. So it's a vast range of firms that, uh, that the FDA is responsible for. So the supervision would focus on both looking at how, uh, those large firms operate their governance, their controls. Um, it would look at things such as their claims handling and areas that were arising, uh, and as well as that, for the vast majority of firms, uh, the supervision would work on a reactive basis.
So what that would mean is there would be information that would come from the financial Ombudsman to say, these are the types of complaints that we're getting. These are the firms where we're receiving the most complaints frequently receive letters from, from, from you and from members of members of Parliament setting out their constituents concerns. There would be whistle blowers, lots of other kind of forms of information would come into the regulator, and all of those would be assessed and put together to build a picture of where the firms, where they were.
The biggest issues that need to be addressed, and supervisors would focus their time on understanding, um, what those firms. Are doing, where things were going wrong, where there needed to be interventions, at a firm level, and additionally where we saw issues happening across a number of firms at the same time or across a single product, there might be an intervention looking into that product as a whole. So to give an example from motor insurance, uh, three years. Ago. Uh, an issue arose where, um, the ombudsman started receiving a lot of complaints where people were saying, well, my car's been written off in an accident.
And the payout I'm getting from insurer is insufficient for me to buy the same car again. Uh, so my team at the time looked into that, uh, and understood that actually across many firms, they were using the, the, the guidebooks of what the kind of costs are for cars and were in most cases using cheaper or the cheapest version of those, as opposed to a kind of range and appropriate average across them. Uh, as a result of that, we wrote to order firms to do anything to stop that.
This is the approach you should be using, uh, trying to stop the harm very quickly and then ask them to remediate, i.e. look back over their records over the last few years and to repay all of those people who had been underpaid. They should be rebated, uh, for money that they should have received at the time. So the intention of all of that supervision is to say we have. Noticed a harm. Stop it. Look back and resolve those.
Resolve those issues. Um, and so you have this mixture of individual firm supervision and then issue supervision based on, uh.
So what that would mean is there would be information that would come from the financial Ombudsman to say, these are the types of complaints that we're getting. These are the firms where we're receiving the most complaints frequently receive letters from, from, from you and from members of members of Parliament setting out their constituents concerns. There would be whistle blowers, lots of other kind of forms of information would come into the regulator, and all of those would be assessed and put together to build a picture of where the firms, where they were.
The biggest issues that need to be addressed, and supervisors would focus their time on understanding, um, what those firms. Are doing, where things were going wrong, where there needed to be interventions, at a firm level, and additionally where we saw issues happening across a number of firms at the same time or across a single product, there might be an intervention looking into that product as a whole. So to give an example from motor insurance, uh, three years. Ago. Uh, an issue arose where, um, the ombudsman started receiving a lot of complaints where people were saying, well, my car's been written off in an accident.
And the payout I'm getting from insurer is insufficient for me to buy the same car again. Uh, so my team at the time looked into that, uh, and understood that actually across many firms, they were using the, the, the guidebooks of what the kind of costs are for cars and were in most cases using cheaper or the cheapest version of those, as opposed to a kind of range and appropriate average across them. Uh, as a result of that, we wrote to order firms to do anything to stop that.
This is the approach you should be using, uh, trying to stop the harm very quickly and then ask them to remediate, i.e. look back over their records over the last few years and to repay all of those people who had been underpaid. They should be rebated, uh, for money that they should have received at the time. So the intention of all of that supervision is to say we have. Noticed a harm. Stop it. Look back and resolve those.
Resolve those issues. Um, and so you have this mixture of individual firm supervision and then issue supervision based on, uh.
11:26
11:26
Speaker 9
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Speaker 9
I think that is a debate that is always had as to what is the appropriate size of a regulator, how much is necessary. And in my mind, uh, you know, it never felt like it was enough people to, to look at those. But, but equally, there is a cost to regulation. Um, and trying to right size, whether it is a very difficult thing to do. I think I'm proud of the actions that were taken by my team over the time I worked at the FCA to look at some very significant issues that arose from, uh, the price of multiple occupancy building insurance after the Grenfell tragedy, uh, to business interruption insurance during the, during Covid that resulted in over £2 billion being paid out, uh, to, to small businesses that otherwise wouldn't have been, uh, I feel there was always sufficient resource to focus on the issues that mattered.
Did that mean we covered everything that needed to be looked at?There's always a risk based decision that needs to be made as to how to focus. Um, the resource that was had.
Did that mean we covered everything that needed to be looked at?There's always a risk based decision that needs to be made as to how to focus. Um, the resource that was had.
11:27
11:27
Speaker 9
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Speaker 9
Indeed. So last July, there was a publication from the FCA saying that looked into this issue, I think the few years prior to last year when when that came out, the focus of many of the consumer groups of parliamentarians of of my team was more on price. The price of products, and being able to ensure that people were able to buy products that they needed, especially during the cost of living crisis and in the aftermath of the pandemic. I mean, what what has changed over the last couple of years is a focus to the other end of the journey of, okay, I might have a product, it may be cheap or cheaper than it may have been previously, but does it provide for me when I come to come to need it?Um, and I think for products like motor, uh.
Uh, you there are, what we've had is a kind of hollowing out around some of the products. So you can get ones that pay out, uh, that either online only policies or bronze level, or one ones that are kind of quite basic that go up to very fulsome products. Uh, and I think, uh, to kind of questions earlier, I think that's something that is kind of quite well understood by consumers as to what, what, what is, what is in those, I think customer understanding around home is one of the insurance.
It's one of the main issues that arose from the investigation that, um, my previous team carried out last year, the subsequent which received complaint building on that as well. Uh, and, uh, as previous evidence was given the focus around consumer understanding of what is covered and what isn't is a kind of crucial, uh. Part of that.
Uh, you there are, what we've had is a kind of hollowing out around some of the products. So you can get ones that pay out, uh, that either online only policies or bronze level, or one ones that are kind of quite basic that go up to very fulsome products. Uh, and I think, uh, to kind of questions earlier, I think that's something that is kind of quite well understood by consumers as to what, what, what is, what is in those, I think customer understanding around home is one of the insurance.
It's one of the main issues that arose from the investigation that, um, my previous team carried out last year, the subsequent which received complaint building on that as well. Uh, and, uh, as previous evidence was given the focus around consumer understanding of what is covered and what isn't is a kind of crucial, uh. Part of that.
11:28
11:28
11:28
Speaker 9
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Speaker 9
Approaches, uh, and in my, um, in my experience at the regulator, the previous evidence suggested that there are some firms who have adopted it and embraced it very closely. And there are others that have seen it as a, uh. An annoyance really, and something to be avoided. I've genuinely seen firms seek to embrace it. Uh, at least, at least to me. Anyway. But the focus around, uh, kind of claims. So what I've seen a lot more is a focus on root cause analysis.
Where you have a firm that they have had increased levels of claims declinature or, or rejecting claims. Understanding why that has occurred has been a kind of one of the jobs that the consumer duty kind of means you should enforce. So at what point in the process do people fall out of it?So is it because they phone up and say, hey, my fence is just blown down in the storm?Um, the insurer says, I'm very sorry to hear that, but your fence is not covered.
Covered by your policy is explicitly excluded. That would count towards those numbers of claims decline because that, that uh, kind of that. Has been asked. There'll be other bits where it goes all the way through in a claim is put in and for, for a reason it is rejected. Now what my expectation, uh, or what the, pardon the FDA's expectation of firms would be to understand what are those main reasons?Why is it those claims are declining, being declined, and either your documentation is not clear enough at the outset.
Your customers don't understand it, or actually you may have the coverage level of this product incorrect. You would expect then to understand that root cause and then the insurer to take action to resolve it by a better information, by changing the levels of cover, by taking, by taking some, by taking some steps. And I think that is an area where the consumer duty has led to, uh, some real significant improvements. I think there's still a long way to go. Um, but there is progress being made.
Where you have a firm that they have had increased levels of claims declinature or, or rejecting claims. Understanding why that has occurred has been a kind of one of the jobs that the consumer duty kind of means you should enforce. So at what point in the process do people fall out of it?So is it because they phone up and say, hey, my fence is just blown down in the storm?Um, the insurer says, I'm very sorry to hear that, but your fence is not covered.
Covered by your policy is explicitly excluded. That would count towards those numbers of claims decline because that, that uh, kind of that. Has been asked. There'll be other bits where it goes all the way through in a claim is put in and for, for a reason it is rejected. Now what my expectation, uh, or what the, pardon the FDA's expectation of firms would be to understand what are those main reasons?Why is it those claims are declining, being declined, and either your documentation is not clear enough at the outset.
Your customers don't understand it, or actually you may have the coverage level of this product incorrect. You would expect then to understand that root cause and then the insurer to take action to resolve it by a better information, by changing the levels of cover, by taking, by taking some, by taking some steps. And I think that is an area where the consumer duty has led to, uh, some real significant improvements. I think there's still a long way to go. Um, but there is progress being made.
11:31
11:31
11:31
Speaker 6
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Speaker 6
To follow up on that, um, I'm the non-executive director of a small bank for the consumer duty. We have a team in the bank who not only inspect what everybody else does, but also prepare elaborate reports for the FCA, detailed things which are required and are inspected by the FCA. File these documents and then answer questions about them to show that our procedures are what the FCA expects them to be. Is that the case with insurance companies?Do insurance companies have. Uh, as far as you know.
Uh, teams within their operation who are responsible for ensuring that the consumer duty is followed and does the FCA. Inspect the process and the documentation of the enforcement of the consumer duty.
Uh, teams within their operation who are responsible for ensuring that the consumer duty is followed and does the FCA. Inspect the process and the documentation of the enforcement of the consumer duty.
11:32
11:32
11:32
11:32
Speaker 9
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Speaker 9
Elaborate briefly, um, the consumer duty is everybody's responsibility. It should be everyone's responsibility in a bank, in an insurer, in a financial advisor to ensure that the customer is at the heart of the products that are sold. That is the whole, uh, ethos behind the consumer duty, uh, and why it was required by, by, by parliament. So, uh. Ideally, it doesn't sit in a team in compliance where everyone can say actually that it's their job to sort out the consumer duty.
It should be the job of the salespeople, the people at the counter. It should be. And the people designing the products. Uh, ideally, the regulator is not requesting vast swathes of. New information to be created for them, but should be relying on what it is that you have received as a non-executive director. What is it your for you to oversee the business appropriately and to understand that your bank is looking after your customers appropriately. That in most cases that will be sufficient information for the regulator to, to rely on.
Um so. There are regulatory returns that firms obviously have to have to submit, but for the most part, I would say insurers would rely on the information that you as a non-executive would receive.
It should be the job of the salespeople, the people at the counter. It should be. And the people designing the products. Uh, ideally, the regulator is not requesting vast swathes of. New information to be created for them, but should be relying on what it is that you have received as a non-executive director. What is it your for you to oversee the business appropriately and to understand that your bank is looking after your customers appropriately. That in most cases that will be sufficient information for the regulator to, to rely on.
Um so. There are regulatory returns that firms obviously have to have to submit, but for the most part, I would say insurers would rely on the information that you as a non-executive would receive.
11:33
11:33
Speaker 9
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Speaker 9
In most part, the the role of the board and the role of the regulator should be. Aligned to an extent of ensuring the continued operation of that company and for its ongoing success. And so much of the, the aims of the two are aligned, uh, management. That you receive in order to run the business in most to the most part, should be the same as what the regulator would like to see to, to oversee and ensure that the organization is complying. That's not to say that's always the case.
And there'll be times when more information is requested in order to to ensure it. And, you know, the the FCA has recently published, um. A report saying these are the things that we'd expect to see in board. Monitoring of the consumer duty reports. But uh. That that's where I can get all of this comes together.
And there'll be times when more information is requested in order to to ensure it. And, you know, the the FCA has recently published, um. A report saying these are the things that we'd expect to see in board. Monitoring of the consumer duty reports. But uh. That that's where I can get all of this comes together.
11:35
11:35
11:35
Speaker 9
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Speaker 9
That is what I said. Um, so the, the 100 or so, uh, the direct supervisors of the, of the firms, there are many other colleagues that support them. So there will be a separate team of actuaries. There is a separate team responsible for the authorisation of firms. There is a separate team for enforcement.
11:36
11:36
11:36
11:36
Speaker 9
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Speaker 9
Uh, so so the decision around allocation of resources, um, is probably. One for the FCA to for you to. Them, but, but just to give, but just to give a summary of, of my understanding of it actually based on the risks, there's a set, this is the size of the organization. These are the risks in terms of to the statutory objectives. Uh, the organization has and resourcing is allocated.
11:37
11:37
Speaker 10
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Speaker 10
My previous question is about um information about claims rates and acceptances. And the sort of presumption was that it was the companies who, uh, differed in their acceptance rates. To what extent is there a fraud problem in claims?I remember some years ago I had a flood in my house and in the end I didn't claim. But while I was toying with claim and I talked to people, they said, oh, this is a wonderful opportunity to get the whole house redecorated. You can get new carpets.
You know, I was astonished. Very reputable people assumed that an insurance claim was an opportunity for you to rip off the insurance company. As I say, I the person who caused the flood, accepted responsibility. It didn't come to an insurance claim, but I just wonder how general this is that the public think that an insurance claim is a chance to rip off insurance companies.
You know, I was astonished. Very reputable people assumed that an insurance claim was an opportunity for you to rip off the insurance company. As I say, I the person who caused the flood, accepted responsibility. It didn't come to an insurance claim, but I just wonder how general this is that the public think that an insurance claim is a chance to rip off insurance companies.
11:38
Speaker 9
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Speaker 9
Unfortunately, insurance fraud is a real issue. Uh, fraud of insurers is something that is actually not really something that the FCA tends to look at. And, uh, in this thing called the motor Insurance Bureau, for example, that looks specifically around that issue for motor, the Abi and firms do share information. There are logs of claims so that. So it's possible to understand, uh, what, what, what is being claimed. But, um, you know, there is a loss adjusters exist for a reason.
And part of their role is to assess the job of insurance should always be to put you back in the position you would have been absent. The issue occurring that's caused you to claim. And so that doesn't mean unless you've bought a policy that is new for old, for example, uh, it is to put you back in the same place that you were you were prior. Not to, not to redecorate your house.
And part of their role is to assess the job of insurance should always be to put you back in the position you would have been absent. The issue occurring that's caused you to claim. And so that doesn't mean unless you've bought a policy that is new for old, for example, uh, it is to put you back in the same place that you were you were prior. Not to, not to redecorate your house.
11:39
11:39
11:39
Speaker 9
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Speaker 9
Balance, I, I. It is incredibly important that consumers can get can make their claims easily. And one of the key tenants of the consumer duty is customer support. At the point of claim. Uh, how easy, you know, at the time that you are your most vulnerable. You're never in a good place when you're phoning up an insurer to claim. What support are you given?Uh, and how and how are you treated?Where there are large walkways, where there are difficult processes, those are the issues that consumers rightly complain about.
Uh, and those are the issues that in aggregate, individually, they looked at by the financial Ombudsman, but in aggregate, they come to the FCA to understand whether or not there's a macro issue with that particular firm or with that part of the market, uh, as a, as a whole, I think one of the difficulties with home insurance, uh, if you take things like floods, it's not one house, you know, depending if it might be a burst pipe, it's one house. But generally when there is a weather event, it is, uh, a number of houses.
It uses up all of the people in that town who have the skills, you know, all the plasters get used up all of their, um, all of their decorators get, get used. And so actually it is a very difficult job. That is not the same for motor insurance where there's enough garages. Well, actually there's not, that's part of the problem. But the you don't have a vast. Number of cars all requiring fixing at the same time with many home issues, they occur because something has occurred in a in a vicinity and that.
And so there are many externalities that have an impact on the ability of those claims to be dealt with.
Uh, and those are the issues that in aggregate, individually, they looked at by the financial Ombudsman, but in aggregate, they come to the FCA to understand whether or not there's a macro issue with that particular firm or with that part of the market, uh, as a, as a whole, I think one of the difficulties with home insurance, uh, if you take things like floods, it's not one house, you know, depending if it might be a burst pipe, it's one house. But generally when there is a weather event, it is, uh, a number of houses.
It uses up all of the people in that town who have the skills, you know, all the plasters get used up all of their, um, all of their decorators get, get used. And so actually it is a very difficult job. That is not the same for motor insurance where there's enough garages. Well, actually there's not, that's part of the problem. But the you don't have a vast. Number of cars all requiring fixing at the same time with many home issues, they occur because something has occurred in a in a vicinity and that.
And so there are many externalities that have an impact on the ability of those claims to be dealt with.
11:41
11:41
Speaker 2
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Speaker 2
Can you tell us from, uh, I mean, you have vast experience in the area. We've had the consumer duty for three years or so. Um where do you come out in terms of do we need more regulation now or are there specific areas which we should be thinking about for more regulation or. Is the way that people embrace the principles which were enunciated with the consumer duty sufficient really to deal with the problem, the problems that the consumer duty was introduced to deal with.
11:41
Speaker 9
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Speaker 9
It's a good question. I don't think there is a I don't there are many different views. Uh, so I'll give you mine, but it'll be so, um, in my time at the FCA. Uh, the insurance distribution directive came in a European directive around, uh, how products were sold, the general insurance pricing practices rules got introduced, uh, which are around to stop loyal customers being charged more for staying with the same insurer. The, um, the product governance rules were introduced that again, looked at fair value assessments.
All of these were very detailed rules and very prescriptive as to this is what you can and can't do. And, uh, a lot of that was really good stuff. And some of it wasn't, it got in the way. It made life more difficult for insurers. It, it didn't have the intended impact that it was meant to, uh, what has also. Been introduced is the consumer duty, which is the other end of the spectrum of saying these are the broad principles.
Um, personally, I much I much prefer the principles, um, because it means that you don't need the vast detail that kind of goes on underneath it. But what insurers need, what the industry need is guidance. It needs support to understand this is what good looks like. And this is this is what we don't want to see. And what the FCA published last year around travel, uh, and how. And, and in their review on outsourcing. And that was focused on saying actually in this type of market, some of the risks around outsourcing, uh, potentially leading to bad outcomes for consumers and more needs to be done here.
And there are, you know, we want to remind insurers that you can outsource the work. You can't outsource the responsibility. It's still you, uh, who's on the hook?Um, and you need to have better management information. You need to be more on top of it than you are all of. That is helping is there's no new rules that have been written, but it's given that extra information to insurers to say, this is what the the expectations are. And it allows for firms to interpret it.
Uh, it allows for firms then to implement it in a way that works for their business with rules like the price walking rules that I mentioned before, it created very different incentives for different firms and changed how the market operated in ways that weren't necessarily understood at the time, that the rules were introduced. A principles based approach allows you to do what's best for your business and your customers. So I have a preference for that.
All of these were very detailed rules and very prescriptive as to this is what you can and can't do. And, uh, a lot of that was really good stuff. And some of it wasn't, it got in the way. It made life more difficult for insurers. It, it didn't have the intended impact that it was meant to, uh, what has also. Been introduced is the consumer duty, which is the other end of the spectrum of saying these are the broad principles.
Um, personally, I much I much prefer the principles, um, because it means that you don't need the vast detail that kind of goes on underneath it. But what insurers need, what the industry need is guidance. It needs support to understand this is what good looks like. And this is this is what we don't want to see. And what the FCA published last year around travel, uh, and how. And, and in their review on outsourcing. And that was focused on saying actually in this type of market, some of the risks around outsourcing, uh, potentially leading to bad outcomes for consumers and more needs to be done here.
And there are, you know, we want to remind insurers that you can outsource the work. You can't outsource the responsibility. It's still you, uh, who's on the hook?Um, and you need to have better management information. You need to be more on top of it than you are all of. That is helping is there's no new rules that have been written, but it's given that extra information to insurers to say, this is what the the expectations are. And it allows for firms to interpret it.
Uh, it allows for firms then to implement it in a way that works for their business with rules like the price walking rules that I mentioned before, it created very different incentives for different firms and changed how the market operated in ways that weren't necessarily understood at the time, that the rules were introduced. A principles based approach allows you to do what's best for your business and your customers. So I have a preference for that.
11:44
Speaker 2
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Speaker 2
Can I just ask you, following up on that, uh, in terms of making sure that people really understand the principles or just. Maybe providing more information, but, you know, how do you then manage an insurance company when you really do you feel we're doing enough?I mean, are we putting. Uh, you know, the ways of, of getting people to be involved in that?I mean, you can imagine many different ways. And I just wonder. Um, if the channel is too narrow and whether we, whether enough is being done to really drive home the principles.
11:44
Speaker 9
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Speaker 9
To contribute to. I, I think. It's there. Are bits that I think have been largely implemented very well. There are bits. Customer understanding is a really big one that I think still. Of what we're talking about here is people not understanding the, the kind of what home insurance is. And there is a job for insurers to do there. But I don't believe it's just the job of the insurers to educate.
Um. Consumers as to what they, what they, um, what they. Need. Tricky thing is when you buy your insurance, you never know what you're going to be claiming for. You don't know that six months down the line, you're going to have a burst pipe and we'll need to do that. And so no, I, I know very, very, very few people who would ever go through and read their insurance product, their documentation. And even if you did, you haven't got the perfect information of why you're going to claim later on.
So understanding the key aspects of what is in your policy, um, actually, for me, when I do it, when I buy my own policy, I think about what matters to me is the service I get. I want to phone at once. I want to make it somebody else's problem, uh, and have that increased level of service that may mean that that policy costs more. Than one where you have some consumers who they are very price sensitive and want to buy and need to buy the very cheapest product that they need in order to protect their house.
They have got a good deal when if they don't need to claim they've paid, they've wasted the least amount of money on the policy. But when they come to claim they may, they have got a basic product and will not receive what they what they have. And some people need to make that decision out of necessity. Others are making it from a lack of understanding. Um, and I think there is a duty for the industry, but also actually it's financial education much more broadly to understand the purpose of insurance.
And when you, when you need it.
Um. Consumers as to what they, what they, um, what they. Need. Tricky thing is when you buy your insurance, you never know what you're going to be claiming for. You don't know that six months down the line, you're going to have a burst pipe and we'll need to do that. And so no, I, I know very, very, very few people who would ever go through and read their insurance product, their documentation. And even if you did, you haven't got the perfect information of why you're going to claim later on.
So understanding the key aspects of what is in your policy, um, actually, for me, when I do it, when I buy my own policy, I think about what matters to me is the service I get. I want to phone at once. I want to make it somebody else's problem, uh, and have that increased level of service that may mean that that policy costs more. Than one where you have some consumers who they are very price sensitive and want to buy and need to buy the very cheapest product that they need in order to protect their house.
They have got a good deal when if they don't need to claim they've paid, they've wasted the least amount of money on the policy. But when they come to claim they may, they have got a basic product and will not receive what they what they have. And some people need to make that decision out of necessity. Others are making it from a lack of understanding. Um, and I think there is a duty for the industry, but also actually it's financial education much more broadly to understand the purpose of insurance.
And when you, when you need it.
11:47
11:47
11:47
Speaker 9
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Speaker 9
Which shows over a period of time that. Things have, broadly speaking, in these markets from a consumer point of view, like got better, stayed the same or got worse. And the underlying question behind that is. So all this activity, regulatory, supervisory, political interference, whatever, how. So I entirely take your point. You gave some examples of where in specific areas, it drives some sets of behavior that may or may not have been what was originally intended. And you gave the example of the, the European um framework.
But do, do we do we know in broad terms whether things have got better, got worse or broadly stayed the same because, you know, points about definitional issues in policies. I mean, no one's ever understood what's in a policy. So, you know, we. We've had that issue forever with insurance. Um, so, you know, is a claims. Handling, getting better, staying the same, getting worse. What's your what's your view or what do we know?
But do, do we do we know in broad terms whether things have got better, got worse or broadly stayed the same because, you know, points about definitional issues in policies. I mean, no one's ever understood what's in a policy. So, you know, we. We've had that issue forever with insurance. Um, so, you know, is a claims. Handling, getting better, staying the same, getting worse. What's your what's your view or what do we know?
11:49
Speaker 16
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Speaker 16
Well, what, what do we know?Say it's. A, it's a really, really difficult question. And I've had um, when we were, I was working on a motor insurance task force a couple of years ago. Ministers were asking the same question around car insurance. What's happened?Actually cars have got more expensive. Therefore claims that have got more expensive. Therefore the price has gone up. Therefore. And actually cars are more disposable than they used to be.
And so therefore. Actually it's very difficult to you're not comparing apples with apples. Um. Generally we've seen prices in real terms for most products, remain broadly stable. Uh, there are a number of different kind of quirks around bans and price walking that have made their be, um, changes. But for example, home insurance last year was 5% cheaper on average than it was the year, the year before. Um, and insurers broadly broke even around these products.
So from a financial perspective, um, sometimes costs go up because claims go up, prices go up. Um, but, but they have been coming down as well. Coverage levels. I think there are more products available now. And so there are more choice. There's more choice for consumers at the price point that works for them. Uh, so it is a bigger market. There is more choice. It is a competitive market. So there is good, uh, there are many new entrants that kind of, that come in and which shows it's working well as a, as a market.
Uh, how is it working for consumers in kind of claims terms?I think there are clearly issues that need resolving. Those are the ones that have been flagged in the FDA report. And also, uh, by, by. The witch super complaint. We haven't talked about travel. Um, I think travel works well for, um, those. People who do not have underlying health conditions. Uh, I think there are significant issues around a availability of the product, uh, for, for others who do.
And in a world where we are living longer and with diseases, actually understanding how product is going to continue to develop, to work for consumers. Uh, that's probably an area where more work. Is being done and needs to be done by insurers, regulators, um, to, to understand it.
And so therefore. Actually it's very difficult to you're not comparing apples with apples. Um. Generally we've seen prices in real terms for most products, remain broadly stable. Uh, there are a number of different kind of quirks around bans and price walking that have made their be, um, changes. But for example, home insurance last year was 5% cheaper on average than it was the year, the year before. Um, and insurers broadly broke even around these products.
So from a financial perspective, um, sometimes costs go up because claims go up, prices go up. Um, but, but they have been coming down as well. Coverage levels. I think there are more products available now. And so there are more choice. There's more choice for consumers at the price point that works for them. Uh, so it is a bigger market. There is more choice. It is a competitive market. So there is good, uh, there are many new entrants that kind of, that come in and which shows it's working well as a, as a market.
Uh, how is it working for consumers in kind of claims terms?I think there are clearly issues that need resolving. Those are the ones that have been flagged in the FDA report. And also, uh, by, by. The witch super complaint. We haven't talked about travel. Um, I think travel works well for, um, those. People who do not have underlying health conditions. Uh, I think there are significant issues around a availability of the product, uh, for, for others who do.
And in a world where we are living longer and with diseases, actually understanding how product is going to continue to develop, to work for consumers. Uh, that's probably an area where more work. Is being done and needs to be done by insurers, regulators, um, to, to understand it.
11:52
Speaker 9
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Speaker 9
Okay. Just ask a topic dear to our heart in this committee, the secondary growth and competitiveness objective which had come in while you were still there. Um. What, what effect, if any, did that had have on how you thought about your work and how you reflect overall on the place of the role of regulation in trying to, uh, have a well functioning market?
11:53
Speaker 16
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Speaker 16
So when it comes to consumer products, like we're talking about today, actually, there is a strong need. Many of the questions I'm. Around consumer protection. And so there is that cloak of, um. Uh, regulation that exists here. And I think it's one of those areas where in the case of international competitiveness, there has been less focus on these products because we want the FDA wants to have that strong oversight of them. In. Another part of my old job was the Lloyds and the London market.
And that's an area where a lot of focus was given to the areas of regulatory simplification. Uh, and, you know, there was a significant pressure and support from London's markets group, the, um, and the LMA and others for how regulation that had potential, that had overstepped the line and consumer regulation that was impacting a wholesale business, how that should be kind of taken, taken back. Uh, and, you know, a much more caveat emptor approach taken to, to how, um, you know, wholesale insurance works. And I think that's one of the big successes, but that's more in the wholesale side rather than the consumer side.
And that's an area where a lot of focus was given to the areas of regulatory simplification. Uh, and, you know, there was a significant pressure and support from London's markets group, the, um, and the LMA and others for how regulation that had potential, that had overstepped the line and consumer regulation that was impacting a wholesale business, how that should be kind of taken, taken back. Uh, and, you know, a much more caveat emptor approach taken to, to how, um, you know, wholesale insurance works. And I think that's one of the big successes, but that's more in the wholesale side rather than the consumer side.
11:54
11:54
Speaker 16
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Speaker 16
It's the way I personally thought, um, whether or not that's how the FCA thinks. Uh, is, is a different question. But I think it's, uh, it is the general drive of simplification of wholesale markets to allow for that additional capital injections to be made. Um, whilst also protecting retail consumers.
11:55
11:55
11:55
Speaker 16
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Speaker 16
Um so in terms of complaints that were made around home insurance, both building and contexts contents insurance last year to the Ombudsman, they were about 15,000 or so. That was an increase. It was the second most complained about insurance product. Um, and around 30% of those were upheld. So about 5000 or so. So if you if you go on the basis of how many home. Sorry, I didn't know how many policies are sold in the UK, but one would imagine it's in the 20 to 30 million based on the number of the housing stock here.
Uphold rates of 5000 complaints. Is is very low uh by the Ombudsman.
Uphold rates of 5000 complaints. Is is very low uh by the Ombudsman.
11:56
11:56
11:57
11:57
11:57
11:58
Speaker 16
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Speaker 16
I think. Last year, the FCA's review of saying this is what how outsourcing this market works, uh, highlighted a number of areas. And I think that's the first review on the back of that, uh, the FDA said that there have been, uh, two firms that are being, have been put into enforcement. Uh, reviews that were undertaken, additional reviews, uh, what are called section 166. So external reviews carried out in a few other cases, business restrictions used, uh, as well. So there has been.
An increased focus on it. Uh, and that will continue. So I think there was no suggestion of being introduced. They were. So from that basis, I think the take on it is that the existing rules from the consumer duty and what sits underneath it, um, is already sufficient. But those areas where there was perhaps a lack of understanding or when more needs to be done by the industry was highlighted. Um, Matt, my predecessor at this table was talking about storm claims being one of those areas.
That's one of those areas where, uh, you know, the FDA has requested that the Abi, the. The trade body for insurers do a lot more around storm damage. Um, and making clear to consumers what is covered, what isn't covered, um, and trying to get a more industry wide, uh, consistent. Approach to, to those issues.
An increased focus on it. Uh, and that will continue. So I think there was no suggestion of being introduced. They were. So from that basis, I think the take on it is that the existing rules from the consumer duty and what sits underneath it, um, is already sufficient. But those areas where there was perhaps a lack of understanding or when more needs to be done by the industry was highlighted. Um, Matt, my predecessor at this table was talking about storm claims being one of those areas.
That's one of those areas where, uh, you know, the FDA has requested that the Abi, the. The trade body for insurers do a lot more around storm damage. Um, and making clear to consumers what is covered, what isn't covered, um, and trying to get a more industry wide, uh, consistent. Approach to, to those issues.
11:59
12:00
Speaker 16
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Speaker 16
Um, I was waiting for a question like that. Um, no, I, you know, I um. Always hoped that firms were trying to do the, the right thing. I always believe that it's actually in the best interests of businesses to look after their customers. Um, for, and for the most part, many of them do. And that's been consistent with what I've seen on, on this side of the table. I think firms are seeking to understand what it is that the regulator wants and how best to, to do it.
Uh, and I think they're, um, yeah, these are complex issues that they're grappling with and, uh, they are continuing to work on it and the light being shone on it by consumer groups, by the regulator, I think helps give them more information and more data to, uh, to, to improve that further. And I think I would hope that as a result of the FDA's work, as a result of the super complaint and as a result of the, uh, additional work that firms are doing on the back of both of those, it will result in a better outcome for consumers over that will be visible over the next couple of years.
Uh, and I think they're, um, yeah, these are complex issues that they're grappling with and, uh, they are continuing to work on it and the light being shone on it by consumer groups, by the regulator, I think helps give them more information and more data to, uh, to, to improve that further. And I think I would hope that as a result of the FDA's work, as a result of the super complaint and as a result of the, uh, additional work that firms are doing on the back of both of those, it will result in a better outcome for consumers over that will be visible over the next couple of years.
12:01
12:01
Speaker 16
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Speaker 16
I don't think I'm well placed to do so. But what I will say is when I was in my previous role, the Ombudsman was a really strong source of information in terms of these are the issues that are coming up from the consumer consumer group. These are the challenges that they're facing. This is where we are seeing increased levels of complaints that helped drive where the regulator focuses at a macro level. So close into close working of the two, um is essential.
12:02
12:02
12:02
12:02
12:03
12:03
12:03
12:03
Speaker 16
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Speaker 16
Um, I assume sitting at this table answering questions about what I did in my previous role will be one of the things that he'll be doing later. Maybe. Maybe after the recess. Um, but, uh. You know, I think. There will always be. Um, individual products where the world changes and there are new issues that come up that cannot be foreseen. Um, what happened to, uh, insurance for flats, for example, after Grenfell, the Grenfell tragedy?Um, was and how the cost of insurance for those went through the roof.
Um very quickly, very quickly. And um the impact that had on those people actually was uh. A really important, but also difficult job, but one that couldn't be foreseen in advance of that occurring. And so, uh, yeah, I think the main piece of advice is you almost. Everything that happens links back to insurance somehow. And so finding out what that, what that will be, whether that's a war, um, whether that's a pandemic, whether whether that is a tragedy of a, of a large fire, uh, understanding what the impact of that will be on you as quickly as possible is always job one and probably part two.
And it's an issue that I cared. A lot about and worked on a lot. And with the Treasury around financial inclusion. Um, and what more can be done to ensure that um, the. Both the poorest in society, but also people with pre-existing medical conditions, for example, have access to the products and services that they need and insurance that they need. Um. How, how to, how to do that, uh, is one of those areas where I think there's still, there's still more to, to, to do.
And I know the Treasury and insurers are working together together on it, but, uh, ensuring that social renters have the ability to cover their possessions and having that product made available to them is one of those areas where I'd really encourage him to continue to focus.
Um very quickly, very quickly. And um the impact that had on those people actually was uh. A really important, but also difficult job, but one that couldn't be foreseen in advance of that occurring. And so, uh, yeah, I think the main piece of advice is you almost. Everything that happens links back to insurance somehow. And so finding out what that, what that will be, whether that's a war, um, whether that's a pandemic, whether whether that is a tragedy of a, of a large fire, uh, understanding what the impact of that will be on you as quickly as possible is always job one and probably part two.
And it's an issue that I cared. A lot about and worked on a lot. And with the Treasury around financial inclusion. Um, and what more can be done to ensure that um, the. Both the poorest in society, but also people with pre-existing medical conditions, for example, have access to the products and services that they need and insurance that they need. Um. How, how to, how to do that, uh, is one of those areas where I think there's still, there's still more to, to, to do.
And I know the Treasury and insurers are working together together on it, but, uh, ensuring that social renters have the ability to cover their possessions and having that product made available to them is one of those areas where I'd really encourage him to continue to focus.
12:06
Speaker 8
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Speaker 8
On an issue that's come up is, is how well does the customer understand the product that they bought?What could be done or what needs to be done to make sure that that process, whether when you buy the thing in the first time or when you renew it later on, that people understand what the the cover is. I mean, the interesting thing about storm damage, it seems to me a, a big gap in, uh. People, householders, understanding what their cover is. Um, what is the best way to go about trying to, uh, reduce those gaps and misunderstandings and.
Between the parties. Yeah.
Between the parties. Yeah.
12:06
Speaker 16
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Speaker 16
Um. So. I don't know. When have you take out insurance products?Do you get a one pager, an iPod?It's called, um, that has on it the kind of key information about that product, but it doesn't cover everything. It's not necessarily something you're necessarily going to refer to again. And next time most people will pick up a policy after it gets emailed to them, after they've bought, bought, or is, is when they come to, to claim.
Um, and so having. It's very difficult to say you can't expect. Nobody has perfect information to know what is going to be coming down the road. What, uh, issue may cause them to need to claim on their insurance. And so how do you ensure everyone is aware of all of the different exclusions of their policy?It's a it is very difficult. Um, I think there are some really key points to it that many consumers are unaware of, such as, um, wear and tear.
Of a building. It is if you're, if you have tiles hanging off your roof or your gutters broken or whatever, and there's a storm, it doesn't mean you get new gutters, you're excluded. There are exclusions for poor wear and tear. Uh, of. Of a building. Storms. You know, the wind has to be of a certain speed, for example, for it to, to count as a storm damage. All of these pieces are areas where the FCA has asked that the industry collectively put their heads together and think about what more can be done.
But more broadly, there is a financial education piece, um, that. That is broader than just individual policies, I think.
Um, and so having. It's very difficult to say you can't expect. Nobody has perfect information to know what is going to be coming down the road. What, uh, issue may cause them to need to claim on their insurance. And so how do you ensure everyone is aware of all of the different exclusions of their policy?It's a it is very difficult. Um, I think there are some really key points to it that many consumers are unaware of, such as, um, wear and tear.
Of a building. It is if you're, if you have tiles hanging off your roof or your gutters broken or whatever, and there's a storm, it doesn't mean you get new gutters, you're excluded. There are exclusions for poor wear and tear. Uh, of. Of a building. Storms. You know, the wind has to be of a certain speed, for example, for it to, to count as a storm damage. All of these pieces are areas where the FCA has asked that the industry collectively put their heads together and think about what more can be done.
But more broadly, there is a financial education piece, um, that. That is broader than just individual policies, I think.
12:09
12:09
Speaker 1
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Speaker 1
Um, yes. I'm just trying to work out whether is the majority, if not all of the information that you get about, um, you know, troubles and complaints, um, from secondary sources. Um, so I think you mentioned letters from MPs. So that's presumably would, and you know, committee expressions from Parliament would come direct to the, to the FCA, but the rest is because. Complaints predominantly go to the fuzz. So that's, that's uh, if you like. And I suppose you read the news.
I mean, do you do any mystery shopping as such so that you have first hand experience?I mean, obviously personally, you each have your, your hundred people are doing something or other for themselves. I mean, do they bring their experiences to the office, as it were?And or do you actually set out to go hunting for things and looking at websites and finding out what's going on?Or do you do that by asking questions of the supervised firms?
I mean, do you do any mystery shopping as such so that you have first hand experience?I mean, obviously personally, you each have your, your hundred people are doing something or other for themselves. I mean, do they bring their experiences to the office, as it were?And or do you actually set out to go hunting for things and looking at websites and finding out what's going on?Or do you do that by asking questions of the supervised firms?
12:10
Speaker 16
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Speaker 16
One of the joys of changing jobs is that, um, I don't know. Everyone tells me their insurance woes whenever I bump into my friends or when I'm ever in. Um, so. Second hand sources is the main way, like through the ombudsman, through complaints, through other pieces rather than, um, mystery shopping. It is used occasionally, um, in certain parts of regulation, but it is not a primary source of, of, of information really. Yeah. Actually the many of the consumer groups will, will do that and will share their analysis and their thoughts and their, um, with us.
So, uh, but there's less mystery shopping is not a primary, uh, yeah.
So, uh, but there's less mystery shopping is not a primary, uh, yeah.
12:11
12:11
Speaker 11
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Speaker 11
Yes. I mean, it is striking that almost everyone has a story about an insurance company letting them down in some way or other. I mean, just raising the issue. People say, oh yes, that occurred, you know, and so on and so forth. And, uh, I wonder, first of all, I'd like to. Repeat the question I asked to the previous witness about motor insurance and motor insurance. The a lot of it is legally defined. What must be insured?Of course, but certainly all the third party fire and rescue stuff.
Um, and we have a remarkable level of acceptance of claims. So is there something is it just the simplicity of motor insurance as our previous witness suggested, or is it the fact that there is a very clearly defined requirement legally that ensures that the customer knows what they're getting and the insurer knows what they must provide?So is the law there important?
Um, and we have a remarkable level of acceptance of claims. So is there something is it just the simplicity of motor insurance as our previous witness suggested, or is it the fact that there is a very clearly defined requirement legally that ensures that the customer knows what they're getting and the insurer knows what they must provide?So is the law there important?
12:12
Speaker 16
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Speaker 16
Yeah. Um. I think when it comes to motor insurance, there's a limited number of things that can go wrong. I can hit you. You can hit me. There could be an uninsured driver involved. There are only a small number of real issues that can occur compared to in a in a home where a pipe can burst. Now it's a pipe under your house. Is it on your property?Is it one that feeds your property?Is it the.
Stations and where what the issues are that can occur and whose responsibility it is are much more complex when it comes to um. Home insurance compared to motor. Uh and. And so I think for a large part, I think that I think that is the, the main reason.
Stations and where what the issues are that can occur and whose responsibility it is are much more complex when it comes to um. Home insurance compared to motor. Uh and. And so I think for a large part, I think that I think that is the, the main reason.
12:13
12:14
12:14
Speaker 11
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Speaker 11
Consumer duty. I mean, if we look at the terms of the consumer duty, enable and support customers to pursue their financial objectives, provide clear information and effective support. Um, avoid causing foreseeable harm, etc., etc.. Do we really think that the insurance industry is following those conditions?Because the nature of the complaints and the scale of the complaints, given that a significant proportion of people who are harmed will not complain and won't realize that the fuzz is there and all this sort of thing, do we really feel that the consumer duty is being followed effectively in this industry?
12:14
Speaker 16
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Speaker 16
So many people who do complain. Oh, sorry. Pardon me, who do have reason to claim have a positive. Uh, experience. No one, no one claims from a position of happiness. You're claiming because something bad has happened to you, and in many cases, you actually, uh, the vast majority of claims are solved both before the consumer duty and post consumer duty.
12:15
12:15
Speaker 16
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Speaker 16
As I said, there are a number of reasons for it. But firstly there. Are. A 75 to 80% of these claims that we're talking about are paid out. Uh, there aren't complaints about them. And the customers put back how they were. And it is a sector that, um, I think is, um, I'm trying to find something that's not. The sector is on a journey. It continues to be improving, uh, around these areas, in my view, uh, around improving how customers understand their products.
There are some great, uh, companies and. Charities that have been set up to help, uh. Insurers change the wording of their policies. So to make them that they can be understandable, understandable to people who have a primary level education and who have appropriate lower reading ages. A study that was done a decade ago suggested that the length and complexity of some policies require they were longer than Shakespeare, and they were more complex than a PhD thesis. And insurers are putting a lot of effort, uh, and are getting a lot of support from, from groups to help them improve those languages.
I think it's a, it's never going to be perfect. There will never be able to cover every eventuality. Uh, and, but for the most part, uh, the evidence I have from my old role and my current role is that firms are trying to continue to improve, to give that good customer service because it is good for their business.
There are some great, uh, companies and. Charities that have been set up to help, uh. Insurers change the wording of their policies. So to make them that they can be understandable, understandable to people who have a primary level education and who have appropriate lower reading ages. A study that was done a decade ago suggested that the length and complexity of some policies require they were longer than Shakespeare, and they were more complex than a PhD thesis. And insurers are putting a lot of effort, uh, and are getting a lot of support from, from groups to help them improve those languages.
I think it's a, it's never going to be perfect. There will never be able to cover every eventuality. Uh, and, but for the most part, uh, the evidence I have from my old role and my current role is that firms are trying to continue to improve, to give that good customer service because it is good for their business.
12:17
12:17
Speaker 16
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Speaker 16
So one of the one of the areas that, uh, I think the FCA published in their publication, um, following the, which super complaint was, uh, how, how will our success be measured?And that included, uh, if I, if I recall correctly, points such as, uh, reduction in the levels, some of, some of that is also down to issues such as if I phone up and say, hey, my fence is blown down, am I covered?Should that be covered as a sum?Is that covered as a rejected claim, for example?And so there are definitional points as well that will have a significant impact on those numbers.
But I think transparency of those numbers is important. It gives that confidence to consumers. Um, but it only works if it's all done on a level playing field and done in the same way. And I think that's an area where the aggregators, the price comparison websites, where the vast majority of people buy their insurance, they have a role to play in ensuring they provide that information, um, to, to, in a way that enables customers, consumers to make that decision at the outset as to, as to what it is that they're providing.
But I think transparency of those numbers is important. It gives that confidence to consumers. Um, but it only works if it's all done on a level playing field and done in the same way. And I think that's an area where the aggregators, the price comparison websites, where the vast majority of people buy their insurance, they have a role to play in ensuring they provide that information, um, to, to, in a way that enables customers, consumers to make that decision at the outset as to, as to what it is that they're providing.
12:18
12:18
12:18
12:19
12:19
Speaker 8
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Speaker 8
Um. The. You've contrasted the acceptance levels of home and buildings very high for motor is the possibility that actually what was going on in the motor sector is that the industry was accepting too many claims, whiplash in particular, and was very slow to catch on to the fact that when people said they had suffered a harm, that they hadn't, and that showed up in premiums for everyone else, but it made them look good in terms of the acceptances that they reported.
10:04
Speaker 16
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Speaker 16
The whiplash performance came in a couple of years ago now. Um, I mean, I. The FCA implementation of. Our GT and I believe for the majority of insurers, their approach is not to look for ways to decline claims. It. I don't believe that is the approach. And actually many of those firms that are writing home insurance also write motor insurance. So we have. I don't believe that there is a vast difference between this part of an organisation and the ones that are sitting next to it, doing a, doing a different product.
I think there is a. What what it shows. Is, is uh. The customer understanding piece, the lack of clarity, perhaps as to what is covered is more significant on some on products such as home than it is for motor. And I think that's what the FCA's work is getting to. Um, and what the super complaint has focused, focused on.
I think there is a. What what it shows. Is, is uh. The customer understanding piece, the lack of clarity, perhaps as to what is covered is more significant on some on products such as home than it is for motor. And I think that's what the FCA's work is getting to. Um, and what the super complaint has focused, focused on.
10:04
Speaker 6
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Speaker 6
Um. It's clear from what we've heard today. And I think what one knows generally about the market, and in light of the super complaint that's been made, that this is a market that's characterised by a, a. FCA imposing sufficient attention, putting sufficient attention on the details of the consumer duty in this area. Should it be rather more forceful about. We heard one earlier about deductibles being applied not to the whole house, but every room in the house. Now, these are simple issues that could be raised at the start.
Shouldn't the FCA be taking a more vigorous approach because it has responsibilities here, as indeed to the insurers themselves, for their own managing their own risk?It seems to me a bit sloppy.
Shouldn't the FCA be taking a more vigorous approach because it has responsibilities here, as indeed to the insurers themselves, for their own managing their own risk?It seems to me a bit sloppy.
10:06
Speaker 16
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Speaker 16
I do, I think the challenge would be. You don't know what part of your insurance product you are going to claim on this year. To to emphasize every aspect of the of the product. Well, then you have your terms and conditions and the policy document. So how. How does one. Uh, highlight those. What is a key?Uh, inclusion or exclusion?I mean, the fact is that almost all insurance policies will exclude fences, for example, that go down as a result of storm damage, but not if a driver drives through your fence, for example.
So it depends on the context of what has happened, how it's happened, and to. And that is in the policy document. But how, how. Is it right to, to, uh, require consumers to understand or be presented with all of that information when they, when they are purchasing the product?How, what is the most appropriate way of doing so?And I think that is a real challenge. I, I'm afraid I don't have a simple answer to that.
So it depends on the context of what has happened, how it's happened, and to. And that is in the policy document. But how, how. Is it right to, to, uh, require consumers to understand or be presented with all of that information when they, when they are purchasing the product?How, what is the most appropriate way of doing so?And I think that is a real challenge. I, I'm afraid I don't have a simple answer to that.
10:07
10:08
Speaker 16
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Speaker 16
I think that's a that's a very, uh, it's a very good point. Um, I think there's a, there's a whole range of different parts of the process where AI could play a positive role. So at the moment, insurers are required to understand the demands and needs of every consumer who comes along to buy them so that they are sold the product that makes sense for them. Um, you know, so understanding where you live, therefore, what the most likely risks are that could come into play.
Insurers will generally be taking that into account when they're, when they are pricing and underwriting that, that risk. But from a consumer perspective, to understand, to ensure that it highlights to you, um, what the most likely or what the deductibles are or what the main risks are for those that's, you know, potentially one of those areas where AI could work well on for, for, for the consumer. It's not an area where I've seen yet. Um. Uh, any real significant step forward to the way you described, but I wouldn't, I would expect that that type of, um, solution may be available in the not too distant future.
Insurers will generally be taking that into account when they're, when they are pricing and underwriting that, that risk. But from a consumer perspective, to understand, to ensure that it highlights to you, um, what the most likely or what the deductibles are or what the main risks are for those that's, you know, potentially one of those areas where AI could work well on for, for, for the consumer. It's not an area where I've seen yet. Um. Uh, any real significant step forward to the way you described, but I wouldn't, I would expect that that type of, um, solution may be available in the not too distant future.