Consumer champion Which? polled over 2,200 car insurance customers, 1,500 home insurance customers and 804 travel policy holders who made a claim in the last two years where it found many were left in the dark and out of pocket as a result.

One in seven car insurance claimants reported their claim was either partially accepted, rejected or in dispute. This was the case for 22% of home insurance claimants and almost two in five (38%) travel insurance claimants surveyed.

Meanwhile, over half (56%) of home insurance claimants and more than four in 10 (43%) travel insurance claimants whose claim was not fully accepted said they did not receive an explanation as to why.

Which? said not receiving an explanation for a rejected claim can lead to confusion and anger, but it also makes it more difficult for them to challenge the decision with the firm or take a complaint to the Financial Ombudsman Service. This is because of the limited information they have to present when making a complaint.

The consumer champion added that this non-disclosure could be falling short of the requirements set out as part of the Financial Conduct Authority’s (FCA) Consumer Duty standards, which come into effect on 31 July.

FCA to introduce new consumer protection standards

The FCA’s new Consumer Duty is a set of standards over consumer protection which requires financial firms to deliver clearer “consumer understanding”. This means any communication must be easier for customers to interpret.

The FCA said: “Firms should ensure they support consumer understanding and deliver good outcomes throughout the claim journey, through timely and appropriate communications.”

However, Which? is concerned that firms are falling short of this requirement, just a week before the new Consumer Duty is implemented.

Vagueness from firms is making it needlessly difficult for customers who are looking to challenge the rejections from insurance companies, particularly from those who are less confident in pursuing clarification.

Insurance firms were recently warned by the FCA to improve when it comes to handling claims from more vulnerable customers.

It comes as the number of rejected claims for home insurance reportedly rose considerably by 57%, and by a quarter for car insurance claims between August and November 2022, the FCA review revealed.

Meanwhile, the watchdog found that 62% of complaints to an insurer are eventually upheld in favour of the customer.

But a complaint over a claim is obstructed if customers do not have the necessary details on where they and an insurance company disagree, Which? warned.

Which? is calling on insurers to “up their game” ahead of the new Consumer Duty. It also wants to see the FCA enforce tough penalties for those firms that fall below the required standards.

Consumer at ‘serious disadvantage’

Sam Richardson, deputy editor of Which? Money, said: “No one wants to be in the position where they have to claim on their insurance, still less have that claim be turned down.

“But not getting an explanation for why a claim hasn’t been accepted in full isn’t just frustrating, it puts you, the consumer, at a serious disadvantage.

“Claimants who don’t get the full picture from their insurers will struggle to take their claim to the Ombudsman, as they don’t have much information to prove where they and their insurer disagree.

“Insurers need to up their game and let claimants know precisely why their claims are not being accepted in full, and as part of its new Consumer Duty, the FCA should clamp down on firms that fall below the required standards.”