Car insurers told to improve claims handling
Fri, 25 Jul 2025
Car insurers have been told that they need to improve claims handling to address issues such as high rejection rates and unsuitable cash settlements.
The Financial Conduct Authority (FCA) says that shortcomings persist in how some car insurers handle claims.
However, it says it is overall increases in the cost of motor claims that have contributed to premium increases, rather than insurers chasing higher profits.
Car insurers have long been insisting it is factors such as the higher prices of cars, labour and energy, plus more complex cars and supply chains, that have been pushing up insurance premiums for motorists.
The number and cost of theft claims, along with the scourge of uninsured drivers, have also risen significantly.
"This confirms that increases costs outside of firms’ control, rather than firm profit, were the biggest cause of recent premium rises in motor insurance," reports the FCA.
The conclusion came after a series of reviews by the regulator to see how the market is working. As part of this, it uncovered what it described as "concerning evidence of poor claims handling practice by some car insurers."
The FCA highlights that some insurers had poor oversight of outsourced services, which led to poor customer outcomes, delays in settling claims and high complaint volumes.
Storm damage claims saw a high rejection rate, with less than a third of storm damage claims made to a sample of firms in 2024 resulting in a payout.
Car insurers were also using cash settlements without sufficient consideration of whether they were most suitable.
FCA deputy chief executive Sarah Pritchard says there is some more work to do on claims handling.
"That’s why we’re stepping up – making sure claims are handled promptly and fairly, and pushing for a coordinated effort to tackle the root causes of rising motor premiums."
The FCA is now addressing these issues directly with insurers, “ncluding taking action against specific firms where necessary. It is also providing evidence to the government as part of its motor taskforce.
Will adding a younger driver to my policy as a named driver reduce my premium?
