FCA partly rebuffs Which? but widens insurance crackdown

In a 38-page formal response to Which?’s super complaint, published today (18 December), the watchdog stated it disagrees with the consumer group’s assessment that it has insufficiently intervened on home and travel insurance claims handling standards.

However, the FCA acknowledged problems with policy complexity, sales practices and the oversight of third-party claims handlers, and confirmed it is expanding its existing work programme.

Which? stated the response showed the regulator had taken its concerns seriously but warned that industry-led improvements must be backed by firm regulatory action.

Rocio Concha, Which? director of policy and advocacy, said: “We are pleased that the FCA has taken our concerns seriously.

“The actions announced today must be the first step towards fundamental reform to ensure these markets work better for consumers.”

Key changes

The FCA stated it will widen the scope of its outsourcing oversight work to include a broader range of delegated authority models and remuneration arrangements, an area where Which? raised concerns about accountability for poor claims outcomes.

The watchdog will also carry out a detailed analysis of claims service quality in the home and travel insurance markets in the second and third quarters of 2026.

This work will feed into a broader assessment of whether firms are delivering fair value to customers.

As part of the post-implementation review of its value measures rules, the regulator will also consider how to better capture claims outcomes and will report back on this work in the latter half of 2026.

To address concerns around how products are sold, the FCA will also analyse different sales approaches at the start of 2026 to assess how they impact consumer outcomes.

The actions announced today must be the first step towards fundamental reform to ensure these markets work better for consumers.

Rocio Concha, Which? director of policy and advocacy,

This work will involve engagement with insurers, brokers, price comparison websites, trade bodies and consumer groups. Then will be followed in the second quarter of the year by a review of how home and travel insurers are helping customers understand their cover, with best practice shared across the market.

Where Which? identified concerns about policy terms and conditions, the watchdog stated it will follow up directly with the providers highlighted by the consumer group to ensure they are compliant with FCA rules at the start of 2026.

Despite rejecting claims of regulatory inaction, the FCA acknowledged there is room for improvement in the way general insurers work.

While 79% of consumers who make a claim say they are satisfied with how it was handled, the FCA stated three out of 10 consumers report there is not enough information available to them to judge the quality of different insurance policies.

Graeme Reynolds, director of competition and interim director of insurance at the FCA, said the watchdog is already seeing firms respond to previous calls for improvement and will use findings from previous reviews to make sure consumers do have the right information to pick the most suitable policy for them.

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

Reynolds added the FCA will continue to intervene where it has concerns.

Hannah Gurga, director general of the Association of British Insurers, said the FCA had provided “helpful clarity” on how home and travel insurers can do even more to support their customers, while recognising that most people are satisfied with how their claim is handled. 

She said: “Driving more improvements in the claims handling process and ensuring better customer understanding remains a top priority for us and our members. 

“We look forward to working closely with Which?, the FCA and wider industry to build on the progress already made, strengthen trust in our sector, and ensure people get the help they need when it matters most.”

Interventions

Since its review of home and travel insurers in July, it has opened two enforcement cases, stopped one firm from trading until problems were addressed, launched three independent reviews into firms’ systems and controls, and required three senior managers to fix issues and consider whether redress is due.

Reynolds said the regulator aims to use the fastest tools available to improve consumer outcomes, noting that enforcement and market studies can take time.

Which? welcomed the expanded programme the FCA has promised for 2026 but said the regulator must now act decisively.

Concha added: “The regulator has pledged swift action to review and address problems with customer service, claims handling and how firms sell products, as well as on policy terms and conditions. 

“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 and issues with how the markets are working.

“Which? expects the FCA to work closely with insurers, comparison sites and consumer groups, but it is essential that any industry-led solutions are accompanied by firm action by the regulator. We will continue to work with the FCA but also hold the regulator to account to ensure it acts with urgency and that these commitments lead to meaningful change for consumers.” 

However James Daley, managing director of consumer group Fairer Finance, said the FCA’s response to Which’s super complaint was unlikely to be sufficient to get to grips with the many and growing problems in the general insurance sector.

“The insurance market is caught in a race to the bottom on price - leading to the hollowing out of products, as well as poorer claims experiences,” he said.

“The solution to this has to start with ensuring that comparison sites give consumers the right information to help them understand what they are buying and not buying.

“That needs to include reliable data about which firms are treating customers fairly at claims stage. We also need to look at some minimum standards in areas where hollowing out has gone too far.”