UK's FCA cites external costs behind motor insurance premium hikes
The analysis also identified that the rising costs of vehicles, parts and labour, as well as car technology complexities and supply chains, have inflated the premiums.
The regulator's report further notes an increase in the costs associated with vehicle rentals, theft-related claims and incidents involving uninsured motorists.
It observed that referral fees paid to credit hire organisations and claims management companies have been linked to protracted claims processing and rising costs.
The FCA has found concerning claims-handling practices in home and travel insurance, including poor supervision of third-party services, leading to delays and customer complaints and a lack of robust management information systems.
It also noted that high rejection rates for storm damage claims, with only 32% resulting in payment, and cash settlements were often used without sufficient consideration of their suitability.
The watchdog said it is engaging with the insurance companies identified as having poor practices and is prepared to take regulatory action where it is necessary.
Sarah Pritchard, deputy chief executive of the FCA, commented: 'External cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling, particularly in home and travel.
'That is why we are 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.'
This month, the FCA, along with the Prudential Regulation Authority and Lloyd's, agreed to streamline the approval processes for Lloyd's managing agents.
"UK's FCA cites external costs behind motor insurance premium hikes " was originally created and published by Life Insurance International, a GlobalData owned brand.
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