#FOS stats reveal the rise of ‘Swiss cheese’ protection of insurance.

By 6th July 2018 June 21st, 2019 No Comments

​Every type of insurance covered by the Financial Ombudsman Service (FOS) has since significant increases in complaints. Melissa Collett discusses how fixation on price is leading to ‘cover with a lot of holes in it’…

The Financial Ombudsman Service has just published its Annual Review this week, and as usual there’s a wealth of data to pore over and analyse.

It’s no surprise to see that, as the percentage of complaints about PPI falls this year from 86% to 82%, the number of complaints about non-PPI insurance goes up from 14% to 18%.

But it’s not just the fall in PPI complaints bumping up the numbers.

The shocking news is that insurance complaints have shot up all round: for instance, the number of travel insurance complaints has jumped by 41%, private medical insurance has increased by 31%, and mobile phone insurance has gone up by a whopping 53%.

But it doesn’t stop there. Virtually every insurance covered by FOS has seen significant increases, including protection.

What’s going wrong? The breakdown by type shows that complaints about claims are up from 56% to 59%, with complaints about administration and sales pretty evenly split with 22% and 19%, respectively. With fewer mis-sale complaints, claims is now the biggest issue by far.

It seems that with consumers becoming more savvy about just buying the cover they need, they now expect more value from it. Of course, the primary value of insurance is the claim.

As Tom Baigrie of Lifesearch said recently, the claim is the product. But when price comparison websites are busy driving prices down, the only way this can be achieved is by cutting corners on cover.

This fixation on price results in ‘Swiss cheese’ cover – cover with a lot of holes in it. No wonder more and more customers are complaining!

One small consolation for insurers is that FOS is upholding slightly fewer insurance complaints. Whilst new complaint numbers have gone up, uphold rates have gone down from an overall average of 35% to 31%. So insurers are getting their claims decisions right a little bit more often.

But it’s still too early for insurers to pat themselves on the back. There is still a huge amount of work to do to reduce the uphold rate to a more acceptable number.

If insurers are letting down even 3 in 10 of their customers, that’s nothing to be proud of. There is a positive correlation between uphold rates and consumer trust.

If insurers want to restore customer’s faith, they need to roll up their sleeves even more and get their decisions right, first time.

As far as IFAs are concerned, with an uphold rate of 36% (down from 40% last year) they fare better than general insurance and/or mortgage brokers with an uphold rate of 42%, but not better than the overall insurance average.

More positively, there were only 1,602 complaints against IFAs as opposed to 18,310 against general insurance and/or mortgage brokers.

Nevertheless, 36% is still too high a rate for comfort. With customers relying on IFAs’ professional skill and expertise, they should be aiming for a better rate than direct insurers who do not provide advice.

Fortunately, apart from larger networks, most IFAs will have fewer than 25 complaints, so won’t have to pay a case fee, and most will also have fewer than 30 decisions in a year so their stats won’t appear in the complaints data published by FOS.

This gives IFAs a bit of breathing space to learn from complaints and continually try to improve their customers’ experience.

Melissa Collett is director, complaints services, Fairer Finance

Article is care of https://www.covermagazine.co.uk

The original article can be found here

Tim Kelly

Tim Kelly

Tim is a highly qualified Independent Engineer with over 20 years experience as an Engineering Assessor of damaged vehicles.

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