FCA announces insurance crackdown
The Financial Conduct Authority has told motor insurers they are falling short of new Consumer Duty regulations and warned them to improve services within three months or face penalties.
In a letter to insurers, it has asked them to check if their policies are offering value for money after identifying cases where GAP insurance, which covers shortfalls when a car is written off or stolen, failed to meet the standards expected.
Its own data revealed that only six per cent of the amount customers pay for GAP insurance is paid out in claims, while some insurers are paying up to 70% in commission to companies in the supply chain.
It also identified incidents of slow settlements, bad selling practices, and poor identification of vulnerable customers, and told insurers that challenges around recruitment, which may impact service levels, and operational issues caused by an over-reliance on third parties, need to managed effectively.
Matt Brewis, director of insurance, said: “A significant part of our activity over the next two years will be to test firms against our priorities and expectations. We will also continue to use data to identify outliers and, where firms are not meeting our rules and expectations, we will take action.”
