FCA steps in on home and travel insurance after Which? Raises alarm

The regulator has promised tougher action on claims handling and sales practices over evidence that millions of policyholders may be facing unfair treatment.

The Financial Conduct Authority has committed to expanding its work on home and travel insurance after a super-complaint by Which? highlighted concerns about claims handling and sales practices affecting millions of UK policyholders.

The regulator said it will strengthen its oversight of how insurers handle claims, improve transparency of what policies really cover, and hold firms accountable if consumers’ experiences do not improve over the next year.

The move follows a super-complaint in September from consumer organisation Which?, raising concerns about “serious failings” in insurance markets covering 32 million content insurance holders, 29 million buildings insurance holders, and around 28 million travel insurance customers.

Graeme Reynolds, the FCA’s director of competition and interim director of insurance, said:

“We welcome Which? shining a light on issues we identified in home and travel insurance. We’ve set out more detail on the action we’ve already taken to fix problems, and we’re expanding our existing work-plan to improve the claims process and consumer understanding of their cover.”

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Why claims acceptance rates are raising red flags

FCA data shows that home and travel insurance claims have persistently lower acceptance rates compared to other insurance products. In 2024, 99% of motor insurance claims were accepted, but only 80% of standalone single-trip travel claims and 74% of home contents claims were approved.

The regulator says these lower rates partly reflect consumers not fully understanding what their policies cover. However, the FCA has made clear that firms must do more to meet the standards set out in its Consumer Duty rules.

Its research shows that most consumers who made a home or travel insurance claim in 2024 were satisfied with the result. But complaints data and claim rejection rates indicate there is still significant room for improvement in how insurers treat customers when things go wrong.

Which? said it has heard “heartbreaking” stories from consumers about their experiences with home and travel insurers, prompting the consumer group to submit a super-complaint on behalf of policyholders.

What action the FCA is taking

Over the next year, the FCA will review how firms handle customer service and claims, including how they oversee third parties that process claims on their behalf.

The regulator will also analyse different sales practices to improve people’s understanding of what their insurance actually covers. It plans to work with insurers, trade bodies and consumer groups to ensure people have the right information when buying policies.

Since reviewing home and travel insurers in July, the FCA has already opened two enforcement cases and stopped one firm from doing business until it fixes identified problems. It has also launched three independent reviews into firms’ systems and controls, and made senior managers agree to fix issues and consider whether customers are owed compensation.

Reynolds said the regulator will monitor consumer outcomes throughout 2026 and take further action if improvements are not made. “If we don’t see improvements in claims outcomes, we will hold the industry to account,” the FCA said in its response.

What this means for insurance customers

The FCA said it will measure success through several indicators, including fewer complaints about claims, improved satisfaction levels in its Financial Lives Survey, and evidence that firms are taking meaningful steps to improve customer outcomes.

The regulator also expects to see changes driven by its work with the industry, particularly as technology and AI create new opportunities for clearer and more effective communication with customers.

Rocio Concha, Which? director of policy and advocacy, said the actions announced must be “the first step towards fundamental reform” in markets that have not been working for consumers. She added: “These issues have been allowed to fester for years, so the FCA must now seize the opportunity to take strong action to stamp out widespread bad practice.”

Which? said it will continue working with the FCA but will also hold the regulator to account to ensure commitments lead to meaningful change for consumers.

The Association of British Insurers said driving improvements in claims handling and ensuring better customer understanding remain a top priority, and it looks forward to working with Which?, the FCA and the wider industry to strengthen trust in the sector.

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