Complaint volumes to the Financial Ombudsman Service (FOS) fell significantly in the first quarter of the 2025/26 financial year, following the introduction of a case fee regime aimed at curbing speculative submissions by professional representatives. But for insurers - particularly those in motor and property lines - regulatory risk remains acute amid persistently high upheld rates and continued consumer dissatisfaction.
The FOS reported that it processed 68,000 complaints between April and June 2025, down from 74,600 in the same period last year. A large portion of the drop was driven by a decline in complaints submitted by claims management companies (CMCs) and legal firms, which fell to 30,800 from 36,600. This follows the FOS’s decision in April to begin charging representatives £250 per case after the first 10 annually, reduced to £75 if the claim is upheld.
While the change appears to be reducing lower-quality or speculative submissions, the FOS acknowledged that many cases processed in this quarter were filed prior to the new fees taking effect, suggesting further declines may be reported in the months ahead.
However, despite the overall fall in volume, complaints related to general insurance products - particularly motor cover - remain prominent and problematic.
Motor finance products (hire purchase and conditional sale) dominated the FOS’s complaints list in absolute terms, with over 27,000 cases handled in Q1. Yet even outside of the finance sub-sector, core motor insurance remains a key area of friction.
In the final quarter of 2024, motor insurance alone accounted for nearly 3,600 complaints, more than any other general insurance category, according to Insurance DataLab. While slightly down from the 4,000 recorded a year earlier, motor cover still made up close to a third of all general insurance complaints.
The quality of complaint outcomes is of particular concern. Motor, buildings, and pet insurance all recorded upheld rates of 41% - well above the industry average of 36%. Other categories such as GAP insurance (53%), building warranties (52%), and commercial vehicle insurance (49%) also exhibited high uphold rates, highlighting both operational weaknesses and potential conduct risk exposures.
Buildings insurance followed motor as the second most complained-about product, attracting more than 1,700 FOS cases in the final quarter of last year, while travel insurance drew 1,100 complaints. Pet and private health policies also made the top five.
Insurers operating in these lines are being urged to improve complaints handling and strengthen internal controls, particularly where high upheld rates suggest deeper systemic issues.
Matt Scott, co-founder of Insurance DataLab, warned back in April that insurers delivering strong financial results but underperforming on complaints metrics may come under increased regulatory scrutiny. “With the FCA expected to take a more interventionist stance, insurers must proactively benchmark their complaints performance and address the root causes of dissatisfaction,” he said.
The FOS’s overhaul of its fee model is part of a wider modernisation effort backed by the Treasury and the Financial Conduct Authority. The reforms are designed to reduce friction in the redress process, encourage better pre-referral resolution, and provide greater predictability to firms.
In parallel, the FOS has launched consultations on improving the evidentiary thresholds for cases and on identifying issues of wider implication - particularly those that risk triggering waves of consumer complaints. These consultations are due to close on October 8.
Motor insurers are already feeling the heat of enhanced regulatory oversight. In the wake of a recent Supreme Court ruling limiting the scope of commission-related mis-selling claims, the FCA has announced plans for an industry-wide redress scheme, likely to cost the sector billions. In anticipation of a surge in complaints, the FCA has granted lenders until December 4 to respond to unresolved disputes, delaying further escalation to the FOS.
For insurers, the current environment underscores the importance of complaint prevention and early dispute resolution. While headline complaint volumes may be falling, persistently high uphold rates and scrutiny of firm behaviour mean that risk and compliance teams must remain alert.
