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UK: FCA Thematic Review – Insurers not delivering on SMEs' great expectations
An FCA review into insurance claims handling for small and medium-sized enterprises found that insurers were not meeting the expectations of SMEs in their handling of insurance claims.
In the review, published on 22 May 2015, the FCA found that there was an overall poor perception by SMEs of the claims experience, with some SMEs stating they had not been treated fairly. The most common cause of dissatisfaction was a lack of clarity over who was responsible for driving the claims outcome, exacerbated by poor communication between insurers, intermediaries, loss adjusters and claimants. In many cases, this poor communication led to delays in reaching a settlement. However, the FCA found no evidence of firms seeking to unduly delay the admission of liability.
The review aimed to build on findings from the FCA's previous retail claims review, to determine whether the generally positive claims philosophy in the retail sphere was evident in the commercial segment of the general insurance market. The focus of the review was on claims in excess of £5,000 and limited to first party non-motor claims such as those arising from fire, flood, theft and business interruption. The FCA commissioned research on 100 SMEs who had made a claim as well as 5 insurers, 10 insurance intermediaries (including 5 MGAs) and 10 loss assessing firms. The FCA assessed the role that all of these parties played in the claims process and found that SMEs were often unclear on each party's role and responsibilities.
Despite the industry welcoming the finding that there was no evidence of insurers delaying the admission of liability, some industry groups have criticised the survey stating that most claims by SMEs are below £5,000 and are handled in-house by insurers without multiple parties involved. Yet many have accepted that, despite these criticisms, improvements can still be made to the SME claims process.
Other findings of the review included a significant number of instances where the sums insured were inadequate to cover the loss incurred. In most cases sums insured should be sufficient to cover both physical assets and business interruption, and failure to do so can result in a misalignment of the customer's expectations with the policy's performance. Although the majority of claims reviewed concerned policies sold on an advised basis by insurance intermediaries, claims on policies sold on a non-advised basis by insurers were also assessed. In some cases the sums insured were below 50% of the amount required to cover the loss. A further finding of the review was that audit and quality assurance processes did not always appear to be working effectively, and firms in the commercial insurance sphere had less developed frameworks to capture customer experiences than their retail counterparts.
The FCA has reaffirmed its expectation that customers should be at the heart of how firms run their businesses, and has stated that firms should analyse the findings of this review and make changes to ensure that SME claimants are treated fairly. The review also stated that BIBA is to publish technical guidance for its members to ensure customers have adequate sums insured.
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