The retail insurance industry has been under significant scrutiny in recent years. In July 2025 the FCA published a package of reports on how the retail insurance market is working, which identified that more work is needed to improve claims and pricing practices to deliver better, consistent outcomes for customers. In premium finance the FCA found that although some consumers benefit from monthly payment plans with no interest, consumers who pay higher rates of interest may not be getting a fair, competitive price. Concerns were also raised in relation to high pricing of motor insurance and the claims handling process in certain retail insurance sectors including home and travel insurance. 

In September the FCA published a Market Study (MS24/1.3) on the UK pure protection market for retail customers. Along with reviewing a range of industry practices that may affect consumer outcomes in this market such as, how premiums are set and vary across channels and the structure and level of commission arrangements, the FCA is also seeking to explore the reasons behind protection gaps and the challenges faced by vulnerable customers.

Lastly, on 23 September 2025, Which? issued a super-complaint to the FCA, highlighting poor consumer outcomes in home and travel insurance. It is concerned that a significant number of insurance firms are not complying with relevant consumer and insurance laws and FCA rules, including the Consumer Duty. The super-complaint in fact accuses the regulator of failing to address non-compliance by insurers. It states that despite the ongoing concerns raised by the regulator, to date no plan has been set out to determine whether firms have failed to comply with FCA rules.

Which? sets out three features of the home insurance and travel insurance markets which are damaging the interests of consumers. These are:

• Poor claims handling: including poor claims and supplier management and oversight of outsourced claims-handling providers, ineffective communication with customers on expectations, progress and claims outcomes, failing to identify customers in vulnerable circumstances and support them appropriately, and insufficient claims governance, including the availability and use of management information;
• Inappropriate sales processes: these include insufficient systems and processes used by firms to properly assess the nature of a consumer’s demands and needs, and the extent to which coverage matches this. The report also mentions poor consumer understanding of insurance products especially due to the complexity of terms and conditions and Insurance Policy Information Documents (IPIDs), both of which are largely unintelligible to consumers, and underused; and
• A lack of application and enforcement of FCA rules and other relevant law and use of terms and conditions of policies that unfairly disadvantage consumers: evidence shows that leading providers continue to have policy terms and conditions that are not in line with FCA rules, or wider consumer and insurance law. The terms examined by Which? would typically contain disclaimers that deviate from offering key protections and rights for consumers, unclear and unfair terms under Part 2 of the Consumer Rights Act 2015. 

Which? makes the following recommendations to the FCA:

Recommendation 1: The FCA should urgently intervene to tackle the failure of home and travel insurance firms to comply with their legal obligations, taking formal enforcement action where necessary to force action and act as a deterrent.

Recommendation 2: The FCA should launch a market study to address the market dynamics driving poor consumer outcomes in the home and travel insurance markets.

Recommendation 3: The FCA and the government should conduct a joint initiative to review consumer protection legal frameworks in insurance and how they are operating in practice, identifying key areas where these need strengthening. These include measures relating to unfair commercial practices and claims handling processes under the Digital Markets, Competition and Consumers Act 2024, Consumer Insurance (Disclosure and Representations) Act 2012 or the Insurance Act 2015.

Concluding remarks

The FCA must respond to the super-complaint within 90 days. Firms, including distributors, should monitor the FCA’s response and next steps closely and consider whether there are specific actions they need to take. Any future market study by the FCA under Recommendation 2 above is likely to explore the insurance distribution market and the relevant firms’ sales processes. 

Firms should review their claims handling and sales processes including their terms and conditions to deliver better, consistent outcomes for customers. They should also consider addressing systemic issues identified from relevant Financial Ombudsman Service (FOS) decisions and take appropriate steps to mitigate any risks