The Financial Conduct Authority’s widening intervention into home and travel insurance may have been triggered by a consumer super-complaint, but brokers say the underlying damage has been building for years, and is now showing up in frustrated clients, lost trust and growing reputational strain for the industry.
James Godsall, of Jukes Insurance Brokers, said the regulator’s move reflects a market that has prioritised price over clarity and claims performance for too long. “We have certainly noticed an increase in new business queries driven by frustrations with cover and claims experiences for online distributed products,” he said. “So this complaint and the FCA response is not a shock.”
Godsall pointed to a prolonged “race to the bottom on price” as a key driver of those frustrations. “Unfortunately there are significant parts of the industry that have engaged in a race to the bottom on price, with inevitable consequences which are negatively impacting consumers,” he said.
While much of the regulatory focus has fallen on direct and online sales, Godsall stressed that intermediary-distributed products are not immune from the same structural weaknesses. Claims outsourcing, in particular, has become a growing concern as the FCA sharpens its scrutiny of governance and oversight under the Consumer Duty. “That is not to say that broker-distributed products are free of such challenges,” he said. “In particular, the outsourcing of claims and the abject failure of some of the large players in that market to deliver satisfactory experiences for clients is a significant concern that we need insurers to address.”
For brokers, the consequences of those failures are felt most acutely at the point of claim, when expectations collide with policy reality. “Consumers finding out what is and isn’t covered at the time of a claim continues to do significant reputational harm to our industry,” Godsall said, “and put consumers in potentially very difficult and distressing situations.”
The FCA’s intervention also exposes the difficulty of reversing decades of product commoditisation. “It will not be easy to unpick 20+ years of allowing these products to become highly commoditised,” Godsall said, “and for the benefit of ‘fit for purpose’ cover and guidance on this to have been overlooked.”
Even so, he said the regulator’s action could provide an opportunity for the market to reset, if it prompts a more coordinated approach to pricing, product design and customer understanding. “We would like to think that this will lead to a consensus among insurers on how products should be priced appropriately to ensure sufficient cover,” he said, “and from everyone in the distribution chain on how to ensure all clients are making informed choices about what they are purchasing.”
Crucially for brokers, the FCA has signalled that its expectations will apply regardless of distribution channel. “FCA focus on ensuring fit for purpose products and clarity of cover regardless of distribution channel would be welcome,” Godsall said.
Whether the regulator’s latest intervention delivers meaningful change will be judged not by enforcement statistics, but by outcomes. “If their intervention results in clearer products, better claims outcomes, and fewer surprises at the point of claim, it will be a positive step for consumers and for trust in insurance more broadly,” Godsall said.
For insurers, that represents more than a compliance exercise. As brokers increasingly absorb the consequences of weak products and poor claims experiences, the FCA’s focus is turning long-standing conduct issues into a direct commercial test of how the market delivers insurance in practice.
