Which? urges FCA to launch home insurance crackdown amid soaring cost of premiums

Home insurance providers have been slammed for providing poor customer service while hiking premiums.

Consumer watchdog Which? found more than four in 10 people were facing delays and obstacles during the claims process. At the same time, the average cost of premiums has surged by almost a third over the past year, according to Go.Compare data. Which? has urged the Financial Conduct Authority (FCA) to take action to improve standards.

Previous data from the Association of British Insurers (ABI) also found average prices for home insurance premiums had rocketed. MoneyWeek has provided tips on how to cut the cost of your property’s cover.

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The criticism of the home insurance market has come as providers are being taken to task on motor insurance. Insurers have been criticised for being unclear about ‘stripped back’ cover options. Which? has also called on the FCA to examine cases of lower-than-expected payouts.

Which?: home insurance market failings ‘concerning’

According to Which?, there has been a drop in consumer satisfaction when it comes to home insurance. As a result, the website said it has not awarded any providers with a Which? Recommended Provider (WRP) gong - the first time it hasn’t done so since it began the endorsement scheme in 2010.

A survey of 1,678 claimants it conducted across June and July 2024 found average satisfaction scores ranged from a low of 59% (TSB) to a high of 70% (Axa). Although 70% is usually enough to secure a WRP award, the website said limitations in Axa’s standard coverage prevented it from achieving the status.

LV, More Than and Policy Expert were among the firms singled out for criticism. Which? said its poll found these providers had exposed the highest proportion of their customers to steep hikes. Increases to premiums were seen by 85% of LV claimants, 76% of More Than customers and 78% of those covered by Policy Expert.

Across the board, it saw a “concerning” gulf between prices and satisfaction levels. More than two-thirds (64%) of respondents had seen higher premiums at renewal, with 11% being subjected to a ‘significant’ hike. At the same time, the website said many of those who had been polled had cited poor value for money as being a significant factor behind their dissatisfaction. Overall, eight out of 20 insurers received two out of five stars due to the settlement values they offered.

Insurers have previously put the price hikes down to the escalating cost of claims. ABI figures released in August showed that the industry paid out a record £1.4 billion on property claims between April and June, up from £782 million in the same quarter of 2023. The insurer trade body said “adverse weather”, including heatwaves and droughts, had had a “devastating impact” on people and their homes, prompting the record figures.

While the cost of claims and the value of settlements was one thing, Which? said its survey had also uncovered issues with the claim process. Almost half (44%) of those who took part in the poll said they had had to chase up their insurer to progress their claim. As a result, 34% expressed regret for making a claim in the first place. Previous research by the consumer watchdog found another 48% of people had encountered at least one issue during the claims process.

Responding to the survey, an ABI spokesperson said: “Insurers appreciate how stressful having to make a claim can be, and they want to help their customers by processing them as quickly and efficiently as possible. However, certain challenges beyond their control can impact on timings, such as delays around repairs, access to skilled tradesmen and in some cases short supply of alternative accommodation.

"Our members understand the importance of clear and timely communication to support customers throughout any claim and we’re working with them to understand where any improvements can be made.”

FCA urged to launch home insurance market probe

Which? has called on the financial regulator to launch a crackdown on poor service and rising costs in the home insurance sector. It has also launched a petition on its website to put further pressure on the FCA. At the time of writing, it had been signed by almost 73,000 people.

Rocio Concha, Which?’s director of policy and advocacy, said: “Our research exposes a troubling disconnect between what customers are paying for home insurance and the service they receive.

“It’s clear that many insurers are falling short in supporting customers when they need them most, resulting in declining satisfaction and record complaints. These practices are unacceptable, especially as premiums continue to soar. It’s time for the FCA to hold insurers accountable and ensure that firms treat their customers properly if they make a claim and provide fair value.”

The FCA is already reviewing the claims-handling processes of insurance providers. It has previously criticised the sector for not yet meeting Consumer Duty requirements.