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An investigation by consumer advocacy group Which? has found that insurers are delaying claims processing and forcing customers to chase bills.
Nearly half (48%) of people who have made a claim on home, travel, car or pet insurance experienced at least one issue during the claims process.
These issues included having to repeatedly contact insurance companies to get information about their cases, and insurance companies failing to identify and respond appropriately when people suffer as a result of the incident that led to the claim. These issues were exacerbated when insurance companies brought in third parties to handle claims.
Some clients felt harassed because they had difficulty obtaining information about seriously ill or deceased family members, only to be told the records were not needed, while one woman developed asthma after being forced to live in a mould-ridden home while her claim dragged on for months.
Rocio Concha, policy and advocacy director at Which?, said: “This study highlights the shocking failure of insurers to handle customer claims in a timely and compassionate manner. It is particularly disturbing to see how insurers are abandoning people who are vulnerable because of the events that led to their claims.”
“At a time when many consumers are facing rising insurance costs, it’s clear they are being deceived — either by poor claims practices that are not commensurate with the premiums they are paying, or by unreasonably high premiums, especially for those who cannot afford to pay a year’s worth of premiums in one go.”
“Today we say enough is enough. The rules for insurance companies are clear, but insurance fraud will not end unless regulators take meaningful action against companies that consistently fail to meet standards.”
In one particularly shocking case, the insurance company asked a recently widowed customer, Tara, where her husband was when calling about coinsurance, even though the insurance company knew he had died.
Tara’s home was burglarized shortly after her husband’s death, with her mementos stolen, and her insurance company showed little to no sympathy for her heartbreak, failed to document her grief, and asked inappropriate questions.
How well insurers handle claims has a knock-on effect on customers’ ability to do other things, with over a quarter (28%) of respondents saying their insurer’s poor claims handling affected this.
The survey also found that insurers’ behaviour is having a direct impact on customers’ physical and mental wellbeing, with almost a third (31%) saying their insurer’s behaviour has negatively affected their stress levels, one in ten suffering from sleep disorders and a further one in ten saying the claims process has affected their physical health.
This is the case of Diane, from Radlett, Hertfordshire, who was interviewed by the consumer advocate, who was badly let down by insurers Hiscox and Ark Insurance after flood damage from a leak left a room in her home uninhabitable. Diane had her contents and buildings cover from two different insurers when she began claiming to repair the leak and replace damaged belongings.
However, she was required to communicate with a different third-party claims processor, and the process quickly became drawn out and repetitive, and the person who was promised to assess her home was never sent to the home.
The delays by the third-party claims handler not only caused stress for Diane and her family, but also led to the mold spores in her home worsening, causing respiratory infections and asthma. The third-party adjuster who was eventually sent to the home was shocked by the conditions Diane’s family was living in and took immediate corrective measures to prevent further damage.
Regulators are requiring insurers that use third-party companies to consider how this will affect their customers, with regulators identifying this as a major risk that could harm consumers.
The regulator, the Financial Conduct Authority, will review how the insurance industry handles claims and how all financial services firms treat vulnerable customers.
Which? has called on the FCA to take tough action against insurers that consistently fail to meet the required standards.
Property and casualty insurers are not the only ones finding problems.
PropertyWire spoke to income protection sector expert Kevin Carr, who noted that insurers in this sector are also experiencing service-related issues, mainly due to staffing shortages.