25
Examination of witnesses
Alastair Reed and James Daley.
Q29 The Chair: Welcome to today’s meeting, which is the third oral evidence session as part of the committee’s inquiry into the consumer insurance market. Thank you very much to Mr Daley and Mr Reed for attending. This session is open to the public. It is broadcast live and subsequently is accessible via the parliamentary website. A verbatim transcript will be taken of the evidence and will be put on the parliamentary website. I invite each of you to introduce yourselves for the record and then we will get into questions.
Alastair Reed: I am the principal policy adviser for money at Which?.
James Daley: I am the managing director and founder of the consumer group and research business Fairer Finance.
The Chair: Thank you both very much.
The first question is to get into the territory that we are interested in. will each of you outline your key concerns regarding the regulation of consumer home and travel insurance? We will start with Mr Reed.
Alastair Reed: Insurance markets are critical to the functioning of our economy and our society. People rely on them to get to work, to buy homes and to travel. However, it is inherently difficult for consumers to know what to buy and to compare products and firms.
It is rare for consumers to, essentially, use an insurance product. We have low claim rates because things often do not go wrong in people’s lives. However, products and firms need to be there for people in some of the most difficult times of their lives. It could be a fire or a flood, or an emergency medical need when they are travelling. It is important that we have clear and robust regulation, and that firms are held to that, to make sure that people get good outcomes in these markets, which are difficult for them.
Unfortunately, we have some long-standing and quite widespread concerns about how the sector has been regulated. Broadly speaking, the regulations are okay; it is more about making sure firms are held to those regulations.
We have concerns about what is sold, how it is sold, how consumers are treated and, ultimately, the outcomes of claims. You see, for example, very low claims acceptance rates, particularly in home insurance. We see people in vulnerable circumstances following the event that led to the claim not being supported sufficiently. We see issues with the outsourcing of claims. When the insurance is sold, we see too much expected of consumers and not enough support to help them to make those decisions, which is leaving people at risk of some quite significant harm.
The regulator has found issues time and time again, going back more than a decade. It last looked at home and travel insurance around a decade ago and found many similar issues to what it found last year in its more recent review and some of the issues we and other organisations were raising. We need to see much more urgency from the regulator and much more willingness to hold firms to account.
As you know, we issued a super-complaint. That was not done lightly. We last did a super-complaint in any market nine years before. We became increasingly frustrated about complacency and the harm in this market, and the downplaying of the scale of harm in this market. We felt we had no other option but to force further work from the regulator.
James Daley: To build on what Alastair said, one problem in this market is how distribution has changed over the last 20 years or so since comparison sites have become the key distribution channel for insurance products. That has created intense price competition. That has been great for consumers in many ways—they have the choice of hundreds of insurance brands at the click of a button—but it has also driven unhealthy competition in the market.
To be able to sell an insurance policy on a comparison site, you need to be in the top five brands. To do that and stay there, you need to find ways to keep your price competitive in a very competitive market. Invariably, that has led to what we would call hollowing out. Insurance policies have continued to evolve, with cover levels being cut, excesses being increased and administration charges rising.
All of this is happening with policies that are incredibly complicated as a starting point. Even if consumers understood what they were covered for at some point in their life, the landscape is constantly shifting in front of their eyes. Comparison sites have not done anything to help consumers get to grips with that quality question. We have had many conversations with them over the years. They use Defaqto to try to help consumers understand the comprehensiveness of a product, but Defaqto’s system is gamed and so many people have five-star ratings from Defaqto even as the market is objectively getting poorer in quality.
There is then not really any support to understand who delivers a good experience at claim stage. Of course, that is the thing that matters, because insurance is nothing more than a promise on a piece of paper. When you buy it, you need to be able to understand who will keep those promises and, ultimately, meet your expectations.
Consumers go into the whole purchase fairly blind. The comparison sites’ interest is in getting you out the other end as quickly as possible, so that they get their commission. In the conversations we have had with them, they admit, “Look, we know your ratings are better. We know we should do more to help consumers, but consumers do not want to spend any more time buying this”. They say that consumers want as cheap a price as possible and they want to get out of the comparison site. The comparison sites are locked in an intense competition on brand—be it opera singers or meerkats—and need to get the customers in the door and out the other end as quickly as possible.
Now that the market is wreaking havoc with quality—there is huge variation in the quality of claims experiences out—consumers do not have any easy way of understanding which firms are doing a good job until they learn the hard way. They also struggle to understand what is included in their policies and what is not.
The regulation that is there has the ability to improve standards and fix some of these problems. Certainly, the consumer duty sets a much higher bar than the industry is operating to, but there is also the need for further prescriptive regulation to look at some minimum standards and the standardisation of certain concepts in this market so that consumers have a better chance of buying products that meet their needs and so that there is proper competition on claims and service in the market.
The Chair: I know the Which? complaint focused on home and travel because you saw the greatest consumer harms there. Mr Daley, do you align yourself with that judgment that those are the problem areas or are there other areas of consumer insurance that we should direct our attention to?
James Daley: We feel strongly that these problems exist in all general insurance markets—in fact in all insurance markets where consumers buy directly or through comparison sites. That can be extended to car, pet, private medical insurance and protection products. These are all products with significant complexity, where consumers do not understand what they are buying.
Many of them are blissfully ignorant. They may think they are happy—and you can have a look at the Trustpilot pages of every insurer and you will see that most insurers have high Trustpilot ratings—but that is because the majority of those people have never claimed and they were asked how happy they were five minutes after they bought the policy.
These problems are across all insurance sectors and they have been building for 20 years. For whatever reason, the insurance industry has decided that it needs to focus on putting up the barricades and preventing further regulation. I would say it is in their interest that they work with consumer groups to solve these problems, because they will get worse if we do not lean into them.
Q30 Lord Hollick: Was it frustration that prompted you to go for the super-complaint? As you say, the issues that you both outlined have been around for quite a long time. You have been discussing it with the insurers and the regulators. Why did the dam burst so that you said you had to take a super-complaint?
Alastair Reed: We had lots of engagement with the regulator and the industry probably three or four years ago now, raising our concerns. We were met with some complacency, for example, on claims acceptance—
Lord Hollick: By the regulators?
Alastair Reed: Yes, and the industry. We had countless meetings where, for example, it was not accepted that the claims acceptance rate in home and travel was a particularly important issue. We had lots of discussion about the data and how firms report, and primarily the blame was laid at the consumers’ door in them not understanding what they are buying. To some extent, that is a driver and could be quite a significant driver of claims acceptance rates being lower. However, we are seeing a lot of cases with some significant poor claims handling. People are getting less money than they should do. If we look at cases from the Financial Ombudsman Service, we see cases upheld where—we are talking about tens of thousands of pounds sometimes—people are getting not enough of what they should do.
The journey to a super-complaint was a number of years. We did a lot of work in the meantime to evidence the harms. We did four major policy reports. We looked at consumers’ experiences when they are making claims. More than one in two people told us they experienced a problem when they were going through their claim. A quarter of people had three problems or more. That could be not being clear at the outset on the process; it could be having to repeat things, which can be upsetting for people in difficult circumstances; it could also be not knowing why you have been rejected, which is quite important if you then challenge that and maybe pursue a complaint. A quarter of people are not sure why they have had a claim rejected.
We also looked at some of the issues James spoke about around how insurance is sold. We had big concerns about people’s understanding of what they were buying and things not being flagged to them that were quite pertinent and causing harm. We looked at storm and flood cover as a deep dive, two areas where the definitions are excluding things that are quite reasonable and should not be excluded. The weather has to be a certain type for it to be a storm, which is not in line with industry guidance and not in line with how the FOS handles things. If it is just heavy rain, they would say that they are not paying out on that claim. The regulator subsequently found last year that just one in three storm claims has been accepted. Similar issues occur with flooding.
Ultimately, the FCA did a series of reviews following the consumer duty and found some quite significant failings with governance within firms—for example, not understanding vulnerabilities of their customers and tracking outcomes, which explains a lot of why this is happening.
Lord Hollick: Why did the regulator resist following that up?
Alastair Reed: It is following up, to some extent, but we were frustrated as to quite what was happening. Last year, it did a claims handling review. It was the first time in 10 years it had done something focused on home and travel to that scale. It found some concerning things. “Ongoing customer harm” was one of the phrases used. The regulator found that cash settlements were being used—this is the quote—“primarily to contain costs”. They offer a lower amount as a cash settlement—this might be to someone who is out of their home following a flood or a fire—“primarily to contain costs”, in the words of the FCA, in the hope that the customer settles. Customers are under a lot of pressure to settle early if they are out of their home and they want to get back in. That is offered rather than offering to fully repair and cover the costs. We all know that building repairs can overrun and take time, and it is difficult to estimate the costs.
We were frustrated. We were not clear what was happening. That was the end of the road for the regulator’s work in that respect. It did not say how many firms it was following up with. We tried a freedom of information request but it would not tell us. We had more meetings. At that point, we issued a super-complaint.
James Daley: It is worth saying that the influence from the Treasury has changed the emphasis of the FCA over the last two years. It has caught a lot of consumer groups by surprise. The Chancellor has made it clear that growth is her number one mission, and of course we all support that, but has decided that one of the ways to unlock that is to deregulate the financial services industry and start to push through a laundry list of lobbying asks, which now we are seeing in the Financial Services and Markets Bill. Then they have leant on their regulators to prioritise this growth ambition. The regulator has a secondary objective to prioritise growth but, since the letters went from the Chancellor and the Prime Minister at the end of 2024 saying they wanted them to explain how they are prioritising growth, that has naturally redirected the focus of the regulator.
The consumer duty was just getting going. The idea with the consumer duty was, “Here is a high bar. We know you are not all there and we do not all expect you to be there immediately, but we will go market by market and theme by theme and point out where you are failing. We will say that this is what good looks like today and this is what poor looks like. We expect those of you at the bottom to improve. Then we will do it all again and we will keep improving.”
Q31 Lord Hollick: What was the Treasury reaction to the point that you have made, that somehow focus on competition and growth was elbowing aside the consumer duty?
James Daley: The Treasury has not engaged with us. Which? and some other consumer advocates and I are meeting the Economic Secretary next week to discuss some concerns about the Financial Services and Markets Bill. It is on the record that the Chancellor has had one meeting with a consumer advocate over her term and that was Martin Lewis. He does policy but he does not do it as broadly as we do, and Which? and other consumer advocates do, in financial services.
Lord Hollick: Can I pick up one point on that you mentioned in your remarks about standardisation? I can understand people that want to get through these websites as quickly as possible; they do not want a great long list of things. The consumer could be made aware of a standard number of things that would be covered and, to the extent that one of them was excluded, there could be a banner note saying that. Can the industry attempt to agree a standard cover for house and travel and things like that?
James Daley: The industry is not in a very good place for this at the moment. The ABI has generally been quite protective of the industry and decided to lobby for less regulation. A lot of people simplify it to “more regulation bad, less regulation good”, but it is about the right regulation.
Lots of individuals in the insurance industry sympathise with that, but their main lobbying group is at the moment saying we do not need more regulation in this sector as it will inhibit competition. That is the wrong way to look at it. We are not about trying to inhibit competition. We accept that competition can play an important part in driving better customer outcomes. However, it can also have unintended consequences, as I outlined at the outset. We need the right rules to have a healthy market, where consumers value and trust insurance. We will not get there without more regulation.
Alastair Reed: I agree. It is about meaningful competition and competing on good customer outcomes, rather than hollowing out products and hoping consumers do not spot it.
I have some sympathy for individual firms. They are under intense price competition. It is very hard for them to break out of that cycle without the regulator helping them to do that. That does not necessarily mean the regulator has to prescribe a minimum standard. That would be quite difficult to do, and I could understand why it may not want to go that far. Doing that could have some quite unintended consequences, and maintaining it over time, particularly with financial amounts, and the trade-off between affordability and cover is challenging.
However, the consumer duty should be working like that, in an iterative process. It should be raising the floor, as James says, of what is sold and how consumers are treated. But the firms that are doing the right things—investing in their products, testing their products and investing in their claims handling experience—are getting penalised by other firms that are undercutting them because the regulator is not following through on what it said when it launched the consumer duty. Firms that took it at its word have put a lot of money into that.
The regulator needs to step up its game in supervising and in enforcing the consumer duty, but also in the insight it has at its fingertips. We have been quite surprised that it lacks the data, in a granular sense, to understand what is going wrong. It has claims acceptance rates at product level, but we need to know what types of claims and what types of issues with the products were causing that. We need to know much more, and it should have that data all the time.
You heard last week from the former head of insurance at the FCA, and the word used was that the approach was “reactive”. Of course, a regulator should be reactive. If a whistleblower goes to it or a consumer organisation puts things in front of it that need to be addressed, it should respond to that and investigate it, but it needs to be much more proactive and it needs much better insight on customer outcomes to do that.
If you look at the regulator’s response to our super-complaint, it had to cite some general survey findings that it has, having asked consumers whether they understand their product. Lots of consumers say yes. They caveat that there are limits to that, but the regulator needs to have much more granular data and understanding about customer outcomes if it is to hold firms to that.
Q32 Lord Eatwell: I have two questions. It is striking that the acceptance rate in motor insurance is so high compared to, say, housing and travel. Given that housing can be individualistic and complicated and travel less so, does the high acceptance rate in motor insurance have anything to do with the fact that the motor industry has another regulator looking at it all the time, under the licensing for motor operation?
James Daley: No, I do not think so. The 99% statistic that is quoted a lot is misleading. The claims acceptance rates that are published by the FCA are flawed. There is no standard definition of a claim. Some firms will log every enquiry as a claim and others will log something as a claim only if somebody has completed a claims form. There will be many people who have called up and said, “Can I claim for this?” The call centre will say that the policy says no and so that does not go down as a claim. Lots of areas of motor insurance are misunderstood.
The other thing that the claims acceptance rate does not capture is whether or not the customer was satisfied with the claim. In motor insurance, the way car valuations are calculated is complex and normally a discount is made for the wear and tear of your car. They will consult the books and say, “The valuation of your 10 year-old Peugeot 3008 is this much and we will take off a little because you have a dent in it”, but you cannot then go out and find a 10 year-old Peugeot 3008 with a dent in it. It means that you then have to buy a worse car than you had before. Those would go down as accepted claims, but a happy customer has not emerged at the end of it. There are many problems in that market.
Thankfully, motor insurance is a simpler product, but we are probably going to see more problems there. We now have a whole new breed of essentials policies coming through in that market, where things that were always commonly covered, such as windscreens, are not covered any more. People do not necessarily understand that repairing a windscreen is a lot more expensive than it used to be, because in modern cars they might have a heads-up display attached to them or they might have a lot of electronics built into them. There are now policies where people are buying cover—
Q33 Lord Eatwell: That was helpful. The second question is quite different. The consumer duty also applies to small firms and therefore we have an intersection with the Chancellor’s concern with growth, in that insurance is important for small firms. Could you reflect on the impact of insurance issues on the growth of small firms?
James Daley: Most small businesses struggle to understand which insurances they need to have and the differences between the policies available. The consumer duty has not yet had much of an impact on that sector.
Lord Eatwell: Why not? Has the regulator not alerted the insurance companies to the fact that small firms are included, or are small firms’ lobby groups not aware? Why not?
James Daley: They do not see it as a great enough risk at the moment. The regulator cannot do everything all at once. This is one area where the consumer duty has not had the impact that it might have done yet. We would have liked to have seen the regulator doing what it did with the GAP insurance market, where it came in and said, “You are not offering fair value. Pull up your socks.” They did not and the regulator shut it down and made them pull up their socks, and then they opened it up again. That sends a warning to other niche, general, personal lines insurance markets.
However, we have not seen that attention on the small and medium-sized end of the market. The providers there are predominantly commercial players and the standards, certainly for larger commercials, are totally different. It is accepted that if you are a large corporate then it is up to you to understand what is in the policy, and you will have to employ—
Lord Eatwell: I ask this because of some experience, not personally but for others I know, with specific insurance at Lloyd’s for small businesses. When something went wrong, Lloyd’s took the small business to court and the business had to withdraw because it could not afford the court case. Maybe my experience has been an outlier, but I am wondering about your reaction to that.
James Daley: It does not surprise me. The volume of problems in that market will be smaller, and so it does not get the same profile as personal lines. But I know from personal experience running a small business that commercial small business insurance is complicated and businesses get even less support.
Lord Eatwell: If the Chancellor wants to target economic growth, this is something to sort out.
James Daley: That is a good point. I hope you will put it in your report.
Q34 Baroness Bowles of Berkhamsted: I would like to continue the theme that we have got on to. You said earlier that the Chancellor indicated that deregulation was the way to get growth, by which one means company growth. However, the fact is that that company growth is off the back of the consumers because they are not getting their rewards for the policy for which they have paid. Is that understood by the Chancellor, or is this just the way it plays out?
Alastair Reed: I do not think we have had major deregulation of the regulations themselves. It has primarily been a statement of intent to the regulators to back off supervising and enforcing. We still have the consumer duty. It can do what it needs to do to deliver good outcomes for customers. It is about risk appetite for the regulator and prioritisation.
It is interesting that, when the regulator consulted firms on a review of its handbook, different industries in financial services had the opportunity to raise any concerns they had about different regulations. We went through the major responses from the trade bodies and very little was put forward, which is often the case with these debates. It is easy rhetorically to challenge regulation, but when you ask people for specifics, very little comes in. It is not that there is a massive change in what is there. It is about how it is interpreted and how firms are held to it.
The consumer duty is more than enough. James talked about how we might need some further interventions on how insurance is sold because we need to make sure that customers have better information, and that will not happen through competition. Comparison sites do not have a lot of pressure to change their customer journeys. They get paid regardless of whom you buy from. Customers are generally quite happy with comparison sites. Even when things go wrong for a customer in insurance, it is quite rare for them to blame the comparison sites, but they are regulated as distributors of insurance products. They are covered by the consumer duty. They should know if what they are selling is leading to harm. Are there issues with some of the products they are selling and how they are selling them? They should be reviewing that and changing their customer journeys. They should be doing much more to enable people to compare firms on the quality of claims experience.
James Daley: If I might have a go at that one as well, I am not entirely sure that there is a coherent strategy here that recognises that well-protected consumer markets create confidence and are a precondition for growth. As Alastair said, not an awful lot has been damaging in what has been done, albeit that I would say that some of the financial ombudsman reforms that are coming through in the Financial Services and Markets Bill will undermine consumer protections.
However, as I said earlier, for me, the greatest damage has been the redirection of the FCA. We have seen that in lots of work that came to completion during 2025, having started with different intentions. You had Matt Brewis here last week. He was famous—or infamous, maybe—for saying that premium finance was a tax on the poor, forcing people who pay monthly to borrow the money to pay it and then pay interest at 20% or 30%. A market study was launched into premium finance but, when it was concluded, it did not do anything. It did nothing at all. The intention was to try to sort this problem out for consumers because there was some unfairness here, but after the Treasury directed the FCA to focus on growth, it then did not do anything. Similarly, in the terms of reference for its protection market study, the FCA said it wanted to address a long list of consumer harms, but its interim report that came out at the beginning of this year said that it was not minded to do anything about most of those.
To answer the previous question about what sparked Which? to launch this, we saw that conclusion of the FCA claims review into home and travel insurance last July. We were expecting it to come up with something robust, but it finished and said, “There are some problems here, but we will deal with them through continuation of the consumer duty”. It seems that the FCA has changed its emphasis and is more reluctant to do anything that is seen as adding regulation at this time because the Chancellor is telling it that more regulation is bad. That is misguided.
Baroness Bowles of Berkhamsted: There is a difference between regulation and enforcing. When industry asks for less regulation and possibly things being a bit less avid, surely they do not want overloading of capital requirements and things like that that cost them. They do not want avalanches of thousands of letters that have to be dealt with, but that does not mean cutting protection. Are you saying that the outcome, whether intended or not, is to cut consumer protection?
James Daley: Certainly. It is to de-emphasise solving some of those problems that might require more rules because that is seen as going in the wrong direction. Nikhil Rathi, CEO of the FCA, is on the record saying that they do not want to write new rules if they do not have to, but they do have to write new rules to solve the problems in these markets.
Alastair Reed: On premium finance, the market study has achieved a bit of impact but did not go far enough. The FCA ruled out any pricing remedies at the interim stage. I have never seen that ruled out before it has even consulted on it. It said, “We will not do any of these pricing remedies”.
There was a crossover with the car finance scandal in that some of the same firms, or certainly one major one, operate in both markets. The Treasury was concerned about withdrawal of credit, but if the pricing is unfair and not fair value, why should consumers suffer? There should be other ways to address issues in the wholesale market provision. We want to see more on premium finance. We think the FCA should look again and should be much more transparent about its modelling and why it ruled out the pricing remedies that it did.
Q35 Lord Turnbull: I want to explore two themes. The first is purely statistical. We can measure claims, but we need some standardisation of definition. There will be claims that are resolved at the first instance, with an offer made and accepted. Then there are those claims that are not accepted and are taken to the ombudsman but may later be settled. Which acceptances are we talking about: the total, or the first part, or the second part? Then there are the claims that do not get accepted at all. It would be useful if, from the time of the consumer duty, we could have a consistent series that broke down the travel journey of each claim in the way that I have suggested.
The second is, when we talk about consumer duty, it is clear it was meant to usher in an era of much better relationships between customers and providers, and it has not done so. We need to look more carefully at the claims management companies. These are, basically, contractors to the industry. Last week, when I raised some concerns about how they behave, Matt Scott was defensive of them. Of course he would be. He works for the industry. He is not an independent observer.
My concern is that we may be seeing the original insurer telling its claims management companies, “Be a bit tougher. Reject more claims. Do not worry if you are rejecting more claims and they are taken to the ombudsman because we will lose some of them there but we will win the others”—and, net, they may well see a commercial advantage in taking it through in this way. That is reflected in the fact that the ombudsman upholds quite extraordinary numbers of claims in the housing sector.
Is there any evidence of deliberately getting tough at the start and seeing what happens? At the moment, it looks like not much light is ever shone on the claims management companies.
James Daley: Yes, you are right. Some firms have a much sharper focus on cost control at claims stage and they are taking the risk that, while that may lead to more complaints, only a proportion of those people will go to the ombudsman and only a proportion of those cases will be upheld at the ombudsman. While that process may have costs, they may be lower than the savings they make from having a tight focus on cost control.
This is part of the problem with consumers not having data to be able to understand who is operating like that. To your point about better claims data, I absolutely agree. As Alastair said, we need more granularity. We need to understand not just a headline number about percentage of claims paid but why claims were not paid. Fraud is one thing, but is it misrepresentation? Is it a lack of consumer understanding?
The other complexity that the FCA data does not get to at the moment is that the distribution of general insurance products is complex. There may be a retail brand on the top, an administrator underneath and an underwriter underneath that. The FCA is reporting that data at an underwriter or a group level, but multiple brands may be sitting underneath that. You cannot do anything with that FCA data at the moment to understand if this brand will be good for me. If I buy a policy from the AA, I may get the AA’s own underwriter or I might get one of a number of other underwriters, but it will look like an AA policy to me. That makes it difficult to then publish clear data on whether an AA policy underwritten by underwriter X is any good or is better than one underwritten by underwriter Y. We need a lot of better data in the market.
Claims satisfaction data may be a better way to understand how different insurers are dealing at claim stage because that takes into account whether the claim was paid and also whether it was paid to the satisfaction of the customer. We do some claims satisfaction data, but even by polling 10,000 customers every six months, we get a statistically significant sample for only about a third of the brands in the market. You would probably need some assistance from the regulator to be able to create a reliable dataset that consumers could use there. If you could expose those firms that are prioritising cost control, consumers would think twice about buying from them. We have all heard some pretty horrific stories about bad claims experiences.
Alastair Reed: The FCA’s findings on use of cash settlements, which I mentioned before, are concerning. That is a way to, using James’s term, contain costs but to be unfair in the payout that you offer to people. The FCA also found that in motor insurance, on the point James made earlier, if your car is written off through a crash or through theft, there was lowballing of offers.
On the point around outsourcing of claims, the FCA announced five new and expanded pieces of work in its formal response following our super complaint. One is on the outsourcing of claims, which is important. It has included the business models and commercial agreements within that. Certainly we have been approached by people in the industry saying that, if the FCA looks closely at how that market is operating, it will find some quite concerning practices—essentially, firms competing on how to get claims costs down, which is unfair and certainly not in line with the consumer duty. That piece of work is important.
I agree that we need more granular data on claims acceptance. However, when we look at the guidance for the existing data that the FCA does on value measures, what firms should be reporting is pretty clear. It has reviewed the data before as well. We feel comfortable using the 99% acceptance rates in motor, 63% in buildings, and 71% in combined home buildings and contents insurance. However, we would like to see it at brand level. It is reviewing this data again currently. We have said we would be open to a breakdown: was it a query from the customer or was it a claims outcome?
Your point about whether it went to the ombudsman is interesting. For many people, taking a complaint to the ombudsman is difficult in the circumstances they are in, for example if they are out of their home and they need these things resolved quickly. There is a huge power imbalance between insurers and consumers. You do not know what you do not know when you buy it. Even when you make a claim, you will probably read into things a bit more, but it is difficult for you to know what was a fair outcome. We cannot rely on the ombudsman. We need that as a backstop. We are concerned as well about how the financial services Bill is potentially weakening how the ombudsman can rule fairly and reasonably on behalf of consumers, on which the Treasury has been clear in all of its statements and consultations.
In the vast majority of the cases, it works absolutely fine. The car finance mass redress is driving those reforms. I do not see what the ombudsman has done wrong in that. It looked at cases that came to it and it came to a couple of decisions. The FCA redress scheme suggests that they were probably on the right lines and the court case. It is quite difficult for the ombudsman, which is downstream from firms not complying with regulations. It has to come to a decision. It is important that it does that, but we need much more proactive supervision and enforcement and the deterrent for firms to do the right thing, which is pro-competition because many firms are doing that and are being undercut if that is not upheld.
Lord Turnbull: I have one quick observation. You do not need to comment on it. It seems to me a paradox is that in home the acceptance rates are low and in motor they are high, and that is deemed to be good. Not long ago, there were lots of stories of fabricated claims—someone bumping into you at a roundabout or whiplash and so on. The opposite may be happening in that sector. Insurers have been too willing, because they are often quite small, to wave those through but in aggregate they have added a lot to people’s premiums. Sometimes the acceptance rate may be a good indicator or it may be a bad indicator.
Alastair Reed: No consumer group will defend any fraudulent behaviour by consumers, and we do a lot to tackle fraud against consumers in other markets on bank transfer scams and fraudulent content on online platforms. The industry does an awful lot, and with the police as well, to prevent fraudulent behaviour and anything more that can be done about any misunderstandings for consumers when they do not know what information they are meant to provide when they are making a claim. No one defends fraudulent behaviour and it should be rooted out because, as you say, it adds costs for all consumers and is illegal by definition.
Q36 Lord Davies of Brixton: A clarification first. James, you mentioned a concept I had not come across before, and that is essentials products. It is like essentials bleach or something like that. Can you describe it a bit more?
James Daley: In 2022, the FCA introduced a ban on price walking so that insurers are not allowed to charge existing customers more than new ones. This is the so-called loyalty penalty. I personally thought that that regulation was a bit of a waste of time because they could have got stuck into some of the things we are talking about today.
The unintended consequence was that brands realised that their customers are price sensitive and that they would need other ways to retain them, and so they started brand stacking. We had already started to see a bit of this in the market, but we then saw a real explosion of it, particularly in car but now in home as well. If you have insurer X platinum policy, insurer X gold policy, and insurer X essentials policy, and if I call up at renewal stage and I say, “I am unhappy with my price”, they could say, “We could downgrade you to the silver policy”. Meanwhile, those customers who are most price sensitive in the market will go to a comparison site and say, “Great, there are some policies here that are cheap. I will buy those”, but those policies do not include things like windscreen cover, cover for your keys or cover for a courtesy car if your car is being repaired. There is also no consistency around what they have taken out. One essentials policy will not necessarily be the same as another.
Again, you are creating a lot of peril for customers. Of course, the majority of them will never claim and so they will be blissfully ignorant. They will think, “Great, I had a cheap policy last year and that was brilliant”. If they had come to claim, they might have been surprised on the downside. We know that every year a significant minority of people are learning the hard way. The windscreen issue that I mentioned is coming up more often with insurers because now loads of policies do not cover it and people do not understand how valuable that coverage is.
Lord Davies of Brixton: Our work is taking place in parallel with the Financial Services and Markets Bill. I am hoping to quote some of what you said next Monday when we start the Committee stage. I do not know when the full text will come around. Is that before next Monday? I cannot remember.
The Chair: No, I should not think so.
Lord Davies of Brixton: That is a shame.
The Chair: You will be able to watch it on catch-up TV, though.
Lord Davies of Brixton: Yes, exactly. Thank you.
James Daley: I am happy to have a call with you and say it all again, Lord Davies.
Q37 Lord Davies of Brixton: Yes. One thing you said that struck me particularly was that comparison sites are, “wrecking the market”. That is pretty dynamite stuff. Do you stick by that?
James Daley: I know comparison sites have been a great thing for competition in the market, but intense price competition in the market has unintended consequences and they have not done anything to address the other side of that. They have stood by as this trend has accelerated because they know that adding more questions, for example, which might be one solution—slowing the journey down, asking consumers more questions and helping them understand the nuances of the policy—then increases their attrition rates. It means that fewer consumers get to the end of the journey and fewer people pay a commission to them. Commercially, doing the right thing in this sector has no advantage.
In theory, the consumer duty should have scared them into doing the right thing but, as I said, the consumer duty sets a bar so high above where everybody is operating that the industry is looking over their shoulders and saying, “What is everybody else doing here? It looks like everyone is still doing what they were doing before.” Until the FCA comes along and calls it out publicly and says, “This is not meeting the requirements of the consumer duty”, everything carries on as it did before.
Compare the Market, which is by far the biggest comparison site, has dropped Defaqto from its car and home channels, and has created its own product ratings, which give five stars to much fewer policies in the market. That is a step in the right direction. I say this as a company that publishes star ratings. Star ratings are a bit too reductive. Ultimately, they do not speak to people’s individual needs. It is perfectly possible to tease out what consumers need by asking them the right questions and helping to guide them to policies that will fit with those needs.
Comparison sites have not wanted to get into that. It is time and money for them, which they are all investing in a brand war. This continues to be one of the sectors that spends the most on advertising. We have been around for 12 years having these conversations with them, but in the end they say, “Look, you are right, but we do not want to do anything with you because it will be time and money that we could be investing in fighting this brand battle that we are caught in”.
Alastair Reed: It would be interesting, if you have a comparison site come to give evidence, to ask them if they have ever dropped a policy that they are selling because it is causing harm or a provider that they feel they cannot stand behind. It would be interesting to ask them if that is the case. My reading of the consumer duty is that they should be asking some quite challenging questions of the policies they are distributing.
The FCA wrote a letter to comparison sites in 2020, and the purpose of the letter seemed to be to remind them that they are regulated. The letter says that many of the comparison sites did not understand their regulatory obligations. It is quite a strange letter, but it shows how they have gone under the radar a little bit. The Competition and Markets Authority looked at the sector about 10 years ago and gave it a clean bill of health.
Policymakers have been a bit starry-eyed with comparison sites because it looks like great competition, and in many ways it is on price. We led the world with the use of comparison sites. It is not always the case in other markets that they are used to the same degree. We need to have a more rounded conversation now and to have some meaningful action to get to better customer outcomes.
One of the FCA’s responses to our super complaint was a working group on consumer understanding and also some work it is doing on sales processes where it is analysing different outcomes. We need to get to some important changes, to James’s point, in the more dynamic sales processes. If you key in some information, they challenge it back or show you something different in response, “Do you realise that this part of the cover often leads to issues? Look carefully at this part of the cover. It is pertinent to you and your circumstances.” That does not happen at the moment. Artificial intelligence could help, but it is very much on the firm selling it to improve its services, however it does that. We also need better information on comparing firms. It is that product matching, whether it is right for you, and then better competition on whom you are buying from as well.
Lord Davies of Brixton: With the consumer duty, a comparison website is not just providing information but is advocating a particular product and has to stand behind it.
Alastair Reed: They are regulated as distributors of insurance products. Brokers are also regulated as distributors of insurance products. In practice, the expectations are much lower on distributors of insurance products. It is partly a mindset for policymakers about the balance between what is expected of firms and what is expected of consumers. At the moment, we expect too much of consumers on things that are inherently difficult or nigh on impossible. There are too many things for you to have to compare. The starting point should be that the products improve because you are always facing an uphill challenge improving consumer understanding on something that is unfair or unreasonable in the first place, but also we need to improve the journeys.
On the products, a key part of the guidance on the consumer duty is reasonable expectations of consumers. Consumers will have many expectations that are unreasonable of insurance—things that cannot economically be covered, such as wear and tear. We cannot change the products for that easily. That is just how the products are. There are other things where things have been hollowed out. I mentioned the storms and floods. It is about technicalities, which is not in line with reasonable expectations if you do research with consumers, nor is it even in line with industry standards from, say, the ABI on storms. The Flood Re definition that is used for the Government-backed Flood Re scheme is not used in all policies to define how water comes into your home. It has lots of carve-outs.
It is changing the products, but it is also then focusing on some key things that are causing harm, which we cannot change in the products.
Q38 Lord Hill of Oareford: You said, Mr Daley, that this problem has been building for 20 years. Was that a specific comment or a general one? The question it then begs, to me, is: what happened 20 years ago? What moments or events have made this problem build?
James Daley: It is the growth of the comparison site sectors. I remember meeting Confused.com in 2003 when it was setting up and was the first one. That was 23 years ago. Of course adoption takes time. Over the course of the last 23 years, that has become the dominant distribution channel across most general insurances. The problems that we have been talking about have been building across that time.
The regulator has done various looks at the market over the years, but has, for whatever reason, always decided to sidestep the bigger issue that was building and the problems with hollowing out. Now here we are 23 years later and those problems are manifest. It is time for the industry to accept that this is not good for them. That is my great frustration. It is in everybody’s interest to work together to solve these problems.
Lord Hill of Oareford: So that I understand, do any specific obstacles need to be removed in the way of providing some of the broader information that people might want to have a more informed decision? Is it just that people do not choose to publish it? What is your solution to that?
James Daley: We have talked about having the right data. Certainly there is not enough reliable data around claims experience. We need to have that.
Another thing that has held the comparison sites back, probably falsely, is the idea that they cannot help consumers more because it is pushing towards the advice/guidance boundary, and they cannot be giving advice. We have already now seen the launch of targeted support in the pensions and investment space or are seeing it at the moment. The FCA is open to creating something that comes through the middle of the advice/guidance boundary. I have always felt that the FCA is open to working with firms to solve consumer problems, but firms often hide behind regulation because then they can say, “We cannot do anything”. That was a convenient set of rules for the comparison site market to hide behind. However, now more than ever the regulator is up for looking at how it can expand targeted support. That is not a barrier as such.
Alastair Reed: That guidance from the regulator could be important. We have not seen it so much in insurance in the last year or two, but in banking, for example, the banks were saying, “We cannot tell our customers that we have a savings account that is offering a better rate than the one they are on because we are breaching data protection”. The FCA got together with the Information Commissioner’s Office and wrote a one-page letter that said, “No, you are not if you do it”. If comparison sites are saying they feel wary of straying into certain areas, there must be examples where the regulator can be blunt and clear and say, “No, you can do this; here is why”, because they need to be doing a lot more. It is partly slightly flying under the radar. Comparison sites were seen as inherently good and, therefore, we did not need to do much more than that.
One area we have talked about but not too specifically is claims experience data. Organisations such as Fair Finance and Which? collect their own via consumer surveys, but there are issues with sample sizes, particularly with a long tail of many smaller brands. Therefore, even if you had that information near the top of a comparison site, probably many providers would not have the claims experience data. Therefore, there is potentially a case for the regulator to step in with a mandatory survey that maybe goes out via insurers so that insurers have to send it to someone after they have resolved a claim. It would have to be done independently with no gaming of that system.
We have mandatory customer satisfaction in the banking industry, following the work by the Competition and Markets Authority. To some extent, it is not a great example because consumers do not usually use it, but you do not have the annual renewals in the same way when people are going on comparison sites. It is quite a different market, but it is an example of how a regulator can intervene to get to those bigger sample sizes. They would need to also then force the use of it, probably with a regulatory rule, because comparison sites may not want to use it for various reasons.
Lord Hill of Oareford: Have you had these conversations with the regulators, for instance, on your advice boundary point, saying, “Can you issue advice on this to clarify it?” If so, how do they go?
Alastair Reed: With the debate on targeted support that James mentioned, which is primarily driven by investments and pensions to begin with, in that context, we were pushing them to do a lot more with the regulatory guidance before introducing this big new regulated activity, which has been a bit rushed through. It does open up risk to consumers quite a lot. We have some quite big concerns about it. We can understand the reasoning, but it was a bit rushed through. The evidence is not brilliant. The testing did not go as far as it could have gone. They did not do as much as they could have done in that context. In insurance, we would be keen for them to look as far as they can at how they can clarify what is there already.
Which? has a money helpline. We are not selling products and we are clear where the boundary is. We can get tailored in the support we offer for your circumstances. There are no concerns there. When firms are selling products and services, they are more wary, but a personal recommendation is the boundary. You can do a lot that is specific to your personal circumstances before straying into a personal recommendation.
Q39 Lord Vaux of Harrowden: We have talked a lot about the problem being that consumers are basically ignorant about what they are buying. Yet, if you go on a comparison website and it comes up with your 10 options, when you click through, you get an awful lot of information about the policy you are providing, including those relatively clear documents with the green tick and the red cross showing what it covers and what it does not cover. Is the problem that consumers do not read this stuff? If so, how do you solve that problem, or is the problem the information that is being provided to them?
James Daley: You are referring to insurance product information documents or IPIDs. Those are not helpful. They disguise the nuances in the products. The problem here is that these products are incredibly complicated. They do a number of different things. Home insurance used to be about rebuilding your house if it burnt down after the Fire of London. Now it will do things like replace your freezer contents if the power goes out. There are a number of perils in there about leaks in your house, or escape of water as the industry wants to call it, subsidence, burglary. These policies do so many different things, and each of those perils comes with different exclusions and caveats. That creates a significant consumer understanding challenge.
IPIDs are not helpful because it is a lot of text on one page. You could do more by disclosing some of those key exclusions in the customer journey. Wear and tear, which we have mentioned in home insurance, is the number one source of complaints. People do not understand the line around wear and tear. The insurer will say, “We are not paying that claim because the leak happened only because you did not look after your roof properly”. We mystery shop insurance journeys every six months and under half of them do not even mention wear and tear in their whole journey. They know that this is the number one thing that customers do not understand, but they do not talk about it anywhere in the journey.
My view is that we need to standardise cover in some areas and create some minimum standards because it is unhelpful to have any competition. The industry is saying, “No, all competition is good”, but let me give you an example from the travel insurance sector. Some policies will not pay enough to fly you home if you die abroad, but you cannot expect customers to engage on that point. The vast majority of them will not die when they are on holiday, thankfully. In a small number of cases every year people learn the hard way that their policy did not have enough cover to fly their partner home. It is incredibly upsetting. Why is competition on that peril good? It is not good. Let us remove that and say that travel insurance policies do that and that is included. Let us focus competition on areas where consumers can engage and make that positive competition.
The other problem we see is insurers enforcing their policies differently. You can have standard terms. They may all have wear and tear clauses in a home insurance document. They all do. However, one insurer may say, “That pipe that burst in your wall was an old pipe. We will not pay that claim”, the insinuation being that we should all tear down our walls every six months and check our pipes, which is completely impractical.
We need to say to the industry that on these things, there is one way of doing this. It is unreasonable to expect consumers to open up their walls and check their pipes. What do you mean by wear and tear? What would be enough for a consumer to have met that standard? People talk about checking your roof every five years. What does that mean? Then we are in a much better place to set customers’ expectations clearly because they know that these policies will be enforced in a way that will be the same regardless of what insurer they are with. At the moment, a lot of that nuance is sitting in claims manuals that nobody but the insurer has access to.
Lord Vaux of Harrowden: That raises the philosophical question of whether the consumer duty is the right way of doing this, because the consumer duty sets out high-level principles about consumer understanding or what have you, but you are talking about specific rules. What are you saying to the FCA that you want it to do in that respect?
James Daley: We are both engaged in this consumer understanding working group at the FCA at the moment. Consistently with how I have been describing the regulatory and political climate, it has stuck us all in a room together and said, “Can you guys come up with something you all agree on and then we will move forward?” That will be difficult because we are all starting on opposite sides.
I am saying that the consumer duty is not enough. I am saying that, when it comes to some of these problems, we will need rules. Many people in the industry are sympathetic to that. They may not want to do some of the things they are doing but they have to because that is how the market operates. You need rules so that the market can all move forward together in a way that is good for the whole market. The rubber will hit the road somewhere over the next few months when we get past the niceties of those working groups and start to say, “We can do nothing here that we can all agree on without the regulator saying it is willing to write some rules”.
The Association of British Insurers wants to run an advertising campaign. That would be a colossal waste of money. How on earth do you deal with the consumer understanding challenge when I could list you off 50 different things that consumers do not understand in general insurance? What will they focus on? We need to think differently about this problem.
Alastair Reed: The important part of consumer duty is avoiding foreseeable harm. That is one of the phrases. Firms know what is causing harm. They should know from their management information. They should know that they get lots of claims on certain things and they are not able to pay out because there is an exclusion that a customer did not know about. They should do something about it.
We need from the FCA either clear guidance where they need to be making changes so that they all move together, or rules. It does not necessarily need to be lots of prescription as to what should be in the core policies and what should not be in the policies. It could be done through guidance, potentially, but it should have been happening anyway. Clearly, the FCA has a challenge in how it implements the consumer duty. The industry or the regulator never quite grasped how it is a different way of working. You need much better insight. There needs to be constant, much more proactive challenge as well. If that cannot work, we need to go back to rules as well. It will help in some places, but it will not be sufficient in others if we cannot get firms to move on some of these issues that are causing harm all the time but persist.
James Daley: Yes, it is a fair point. The regulator could say to the industry, “It is a foreseeable harm not to have enough coverage to fly home someone’s body if they die abroad. What other areas do you know that consumers do not understand but only ever learn about the hard way?” That would achieve rising standards less consistently than the regulator saying, “We want to draw some firm boundaries here and stimulate competition on areas that consumers can understand”.
Q40 Lord Vaux of Harrowden: Was the document Consumer Understanding: Good Practice Scenarios for Improvement that it issued in March helpful?
James Daley: It is fine. We monitor the clarity of policy wordings. We mystery shop customer journeys. The quality has improved marginally since the consumer duty came in. The FCA’s updates like that have been a bit more vanilla over the last 18 months because of the political pressures. When you think back to the beginning of the consumer duty when they were making threats to the gap insurance market and shutting it down, here it is, “We think you should all be a bit clearer on this, and here are some examples of things that we did not think you are doing as well”.
The average reading age for insurance policies is still between 17 and 18 years old, and one in six British adults has a reading age of 11 or less. There is a massive gap and most of the industry has settled down into looking over its shoulder now going, “Everybody is still doing it the old way and so maybe we continue”. We rewrite insurers’ policy wordings and so I have been involved in lots of those projects. It is not easy and it is often about persuading underwriters to let go of how they have been doing things for 20 or 30 years and say, “No, you cannot use that language anymore. You need to express what you want to cover and what you do not in language that your customers can understand.”
I could now provide lots of examples of policies that have gone through that journey and come out the other side and written something that a lot more consumers could understand, but the regulator has taken its foot off the gas there. Progress is not nearly as great as it could have been.
Alastair Reed: I would ask the regulator as well what the consequences are for a firm reading the good practice/poor practice reports and not doing anything with them. James used the term “vanilla”. It seems quite softly-softly with some examples here and some examples there. In some of those reports, they found some quite concerning things and I am not sure what the consequences are. There needs to be consequences, again, for the firms not doing the right thing.
When consumers are disclosing things when they are buying insurance, the legislation could be improved in a couple of areas as well. We have the Consumer Insurance (Disclosures and Representations) Act 2012 or CIDRA. We have laws there about failure to disclose. Those could be improved. Sometimes firms do not describe the law correctly in their policy terms. It is legally unfair to do that. It needs to be done properly. We put examples of that in our super complaint. It is on the FCA to enforce consumer law.
In the Insurance Act 2015, the burden of proof is on the consumer to show if they had an issue with something in their application that was not relevant to their claim. That should be flipped. The burden of proof should be on firms to do that. It is difficult for consumers. For example, if you were taking out your home insurance and you got the lock type wrong on your front door but then had an escape of water, a leak in your home, that is not relevant but it is on the consumer to make that case in the process.
Also, the FCA should have fining powers for breaches of consumer law. The Competition and Markets Authority has those powers, and the FCA should as well, again, to provide that deterrent for firms to follow law such as their policy terms being legally fair.
The Chair: We are running a little short of time and I want to draw this to a close fairly soon. Could we concentrate on short questions and short answers for the remaining ones? I know Lord Smith has to go imminently and so if I could get him to leapfrog with the next question?
Q41 Lord Smith of Kelvin: Is this just a British problem? Do we have anything to learn from other countries? Do they do it better, or is insurance the same the world over?
James Daley: We have not done a lot of work into the international context here. We have looked at insurance pricing, and there are different approaches to insurance regulation around the world. Yes, these are reasonably universal problems, particularly in markets where comparison sites exist.
Q42 Lord Lilley: It has become clear that it is difficult for the comparison sites in particular to work on the basis of a standard product, and even harder to compare compliance and response to claims. If it is difficult for the comparison sites, is it equally difficult for the regulator? What are you proposing? It has become clear that Mr Daley is proposing a form of standardisation of the product, and perhaps you are both proposing more information so that the sites can use a standard form of information. Is that the case? That is the first part of my question. If I am allowed a second half of the question, I will come on to it.
James Daley: Yes, you have expressed correctly what we are proposing: better disclosure and then simplifying the product somewhat through some elements of standardisation and minimum standards. That would go a long way, and then better information and better claims data for consumers to be able to rely on and better journeys to help match consumers up with products that meet their needs.
Alastair Reed: I agree. On standardisation, it is what gets standardised and the mechanism. The regulator can do a lot under the consumer duty. It is identifying those terms where there is not meaningful competition. Although there are lots of them, it can be done relatively quickly and urgently. Then you put more pressure on comparison sites to find the terms that consumers need to shop around on, disclose things about and make decisions on, but which of those are causing harm? Which are leading to claims being rejected or partially accepted claims? Can we make the journey about those?
On comparison sites, often the comparison is made on the easiest things to compare—financial amounts to do with medical claims in travel or excesses—but, as James says, the nuances are hidden. For example, if you are travelling, if you have a connecting flight that gets delayed, that is quite important to you, but that is not surfaced on a comparison site. You could easily say, “Might I have a connecting flight as part of my travel?” They could then surface, “Some of these policies do not cover connecting flights in the way you might expect”.
It is some of those things, but the starting point needs to be the products, because you want to home in on the key things you need consumers to make decisions on and be clear about what they are disclosing.
Q43 Lord Lilley: My related question is: if you have a standard product, what will it include? I prefer to self-insure for things that I can basically cope with. I cannot cope with my house falling down or burning down or being washed away, but I can cope with the freezer not working and I do not particularly want to insure against my freezer not working. I take care about that, having experienced it once and it is not going to happen again. Why should I bear the risk for all the people who are not taking care of it? There are a lot of things like that. If you have a standard product, how can the person who wants to self-insure for significant but not major claims cope?
James Daley: To be clear, I am not advocating for complete standardisation. I am saying that some core elements should be included, and then the competition can happen beyond that. You might have freezer coverage as an add-on, and then you can decide whether you want to add freezer coverage. You would not and somebody else might do, and that is fine. People should not have to find out the hard way that core perils are not covered or are excluded in a way that they could never have understood before they bought the policy.
Alastair Reed: There will always be a lot of tailoring in excesses. Still a lot of consumer choice is involved here. It is getting down to those core terms where it is not meaningful, it is not informed on the consumer’s part and it is not in line with reasonable expectations. If heavy rain damages your roof and you get a leak, most people would want to be covered, but there will always be certain things that are not quite right for you and not quite right for others. That happens already to some extent, but it goes too much against consumers because of products being hollowed out. We need to bring things up in certain areas.
James Daley: If I might, I want to quickly mention storms because it is a good example. Everyone is trying to get around an idea that we agree that a storm is a 55-mile-an-hour wind speed and so much rainfall. The problem is that we do not all have weather stations on our houses. Trying to standardise and all coalesce around one definition of a storm will not solve this problem.
Consumers want their house to be insured if there is a weather event that damages it. If that means that we all have to pay a little bit more because more of these claims get paid, it is probably for the best because, at the moment, you end up with people finding out that the wind was blowing at only 50 miles an hour at the local weather station and so they are not covered. That is not the point. That is another area where I would want to try to standardise and rethink what is covered for consumers in those situations.
Q44 Baroness Donaghy: Is it feasible to have a comparison website based on the quality of the product?
James Daley: Yes, 100%, of course. They could do so much to build journeys that match people up with the right products and then, with the right data, help them make informed decisions about which firms are most reliable when it comes to claims stage. Some of those things are hard for them to do unilaterally and we need the right data and we will need regulatory assistance to get that. It is possible but, at the moment, they have no commercial incentive to do it. As Alastair said, they do not seem to get the flack when things go wrong anyway. People blame the insurer. The regulator either needs to start leaning on them a lot harder or needs to write some new rules to make it clear what it expects from them or new guidance.
Alastair Reed: Which? has a partnership with a comparison site and a new one starting soon with our ratings for firms and products. That has limitations and many consumers will not opt into that anyway. As I mentioned, there are limitations to the sample sizes we have and the coverage of insurers. Intervention is still needed, which would mean that everyone is seeing that if they go on a comparison site. Everyone is seeing—and it is done by the regulator—those quality measures as well.
Sometimes we assume consumers want things low priced and want things fast. That is because we have not alerted to them to some of the risks at that point. We have not slowed things down a little bit. We have not played things back to them, “You told us this. Do you know the consequences of that, or not telling us this?”
Of course, you might have a driving factor when you do these things, but when we say what consumers want, we need to have a slightly more considered approach. If you were to sit consumers down and do some deliberative research and slow things down and ask them if they realise about claims acceptance rates or if they realise about issues with products, consumers would give a more rounded view of what they want. Of course, we live busy lives and when they go on a comparison site, they will often go for one of the cheaper products and spend as little time as possible, but that is human nature. We need to design the journey to challenge that in places.
Q45 Baroness Donaghy: Do you have concerns about any attempt to weaken the FOS?
Alastair Reed: Yes.
James Daley: Yes.
The Chair: Thank you. All right, that is a whole different area that we probably ought not to get into right now.
Mr Daley, Mr Reed, you have been generous with your time and have demonstrated considerable understanding of the consumer issues. We are grateful for your explanations. Mr Daley, thank you for your written evidence—our first piece of written evidence. If either of you wishes to follow up on anything that you have not managed to cover adequately in this session, we are happy to receive written material from you. Thank you both very much.
