“I had a bit of a nervous breakdown,” Jacopo confesses.
“My little one said: ‘You always say we’re going to move out and get the work done.’” Then he says he did something he’d never done before: “I threw something on the floor out of frustration, and it broke. A plate. [The kids] got really scared — what’s going on with dad?”
The mild-mannered Italian economist hit breaking point after what he describes as “the biggest experience of inefficiency” that he has had in the UK.
Jacopo has been stuck in limbo with Axa, his insurer, for more than two years. The leaseholder of a flat in Hackney, east London, Jacopo and his young family have lived between damp walls, under the constant buzz of dehumidifiers, since a leak in September 2023. They have turned away houseguests and warned their children’s friends to stay clear of screws they have used to pin down buckling floors.
Axa initially deemed them ineligible for rehousing, then reversed its decision. But by then, Jacopo says, the damage had spread and costs had ballooned. The family is still battling with the insurer, asking to be moved to alternative housing so that their home can be fixed, as they dispute Axa’s offer of a settlement of just over half of the loss adjuster’s damage estimate of £60,000. With his older child now preparing for GCSE exams, however, Jacopo is considering admitting defeat and taking the money.
Frustration with insurance is one of modern life’s great constants. Almost by their nature, claims can be complex and stressful and insurance carriers are fated to be unloved, since they are hauled in only when things go wrong.
But recent data from the Financial Conduct Authority shows the situation is deteriorating, with insurers denying more claims on home and travel policies, while the claims they do uphold can be painfully hard to resolve.
Last year, insurers paid out just 71 per cent of claims on combined buildings and contents insurance policies, down on the previous year and down five percentage points compared with 2022. That contrasts with motor insurance, where more than 90 per cent of claims are paid.
So what is causing the rise in insurance claim rejections — and is there anything customers can do to increase their chances of a payout, should the worst happen?
In September, the rise in denials and widespread consumer frustration prompted consumer group Which? to file a “super-complaint” with the Financial Conduct Authority (FCA) — a rare step to address poor treatment of customers in the home and travel insurance sectors.
Which? claimed the regulator had allowed insurers to act unlawfully for years, by taking too few enforcement actions against the worst actors and allowing insurers to mistreat their customers.
While the FCA has until the end of the year to respond to the super- complaint, the Association of British Insurers (ABI) rejects the allegation that the regulator has taken little decisive action.
“Our experience is that the FCA has intervened robustly,” says Mark Shepherd, head of general insurance at the ABI.
“While we recognise some of the issues in the super-complaint, we disagree with their suggestion that there are widespread failings [in the home and travel insurance markets],” he adds.
The ABI argues that rejection rates stem from poor consumer understanding of home insurance products, including treating insurance policies as “maintenance” contracts, rather than protection against disasters.
Insurers and the ABI also argue that claims rejection data may be inflated by customers calling up to ask what is covered by their insurance policies — to check whether damage to a fence, for example, would be included — which can sometimes be recorded as a claim.
The total value of claims paid last year by UK property insurers rose to £5.5bn, according to data from Deloitte, as climate change led to more flooding and inflation in building costs drove up the value of claims.
When we asked FT readers to get in touch with their experience of making home insurance claims, dozens wrote in to share their stories.
Readers who were customers of the UK’s largest insurers, including Allianz and Axa, described labyrinthine claims processes in which they were bounced between loss adjusters and denied options they believed were clearly included in their policies.
They told us about incompetent loss adjusters, frequent changes to the third parties contracted to work with insurers, being forced indirectly to bear the cost of inflation, despite having insurance policies that were index-linked, and needing to have contacts within the insurance industry in order to understand claims well enough to make progress.
The ABI says that focusing on such case studies can be misleading. “Taking individual examples and extrapolating out from them is quite dangerous,” Charlotte Wightwick, the ABI’s head of conduct regulation, says.
The arduous process of pursuing a claim tends to hit poorer customers hardest, since they have fewer resources to throw at the problem.
But even the most affluent homeowners can feel strung along by their insurers.
Ray, who like others in this story asked for his full name not to be used, was shocked at how the industry handled every stage of his home insurance claim, which ultimately totalled more than £3mn.
In October 2022, a freak event occurred. His home was struck by lightning, setting fire to the roof. Ray and his wife were unable to reach their insurer Home and Legacy, then owned by Allianz. Days later — after the roof had fallen in, with rain pouring in on their possessions — H&L finally sent a loss adjuster to the property. Ray says he seemed inexperienced and “quite excited by it all”.
The loss adjuster quickly concluded that the home would need to be demolished and rebuilt at a substantial cost, Ray says, prompting H&L, which had been delegated underwriting authority, to shift responsibility to insurer LV, also owned by Allianz, due to the large size of the claim.
The couple asked for the property to be rebuilt and understood from H&L and their loss adjuster that LV had agreed. By December, the couple had drawn up detailed cost estimates and the loss adjuster had identified a contractor who could start the process that month.
But, citing concerns about the soaring cost of building materials and the possibility of runaway expenses, LV reversed course, refusing to carry out the works and insisting on a cash settlement, even though its policy provided an option for rebuild.
Later, when Ray and his wife complained to the Financial Ombudsman Service, it found that LV had changed tack after being “surprised to see the estimated cost of repair”.
The couple sold the fire-damaged property and accepted LV’s lump sum settlement — a decision the FOS concluded they took because they had been given “no choice”.
The FOS concluded that LV should have carried out the rebuild, and had acted unfairly. But it ordered no additional compensation beyond the £5,250 that LV and H&L had paid the couple.
“While large claims can be complex, particularly when assessing reinstatement costs, we are committed to ensuring a fair and timely settlement for our policyholders,” Allianz says. “This case is complicated and it’s important to bear in mind that we paid more than £3mn on this claim.”
Then, Ray says, came what he considers the most irrational part of the saga.
When the couple sought to purchase an insurance policy on their subsequent home, which they needed to take out a mortgage, they were repeatedly denied by carriers.
They were ultimately able to secure cover from a “slightly more obscure” provider — only after agreeing, in a highly unusual move, to fit a lightning protection system to the new home, despite its different location.
“They obviously seem to think we attract lightning,” Ray says.
A number of FT readers who contacted us reported that the stress of chasing insurance claims had harmed their health. Which? has also found in polling that poor claims handling harmed consumers’ mental health, an issue it raised in its super-complaint.
Julie, who lives in a suburb of Bradford, West Yorkshire, says she had to stop working full-time as she chased a claim against insurer Axa, due to a leak after a pipe in her home froze in 2022.
Axa has upheld four complaints she has made through the process, and awarded her more than £1,100 in compensation. The FOS found that Axa’s handling of her situation had not been “prompt or professional,” but did not order additional compensation. Nearly four years since the leak, remedial work on her home is ongoing, and Julie says she fears her future insurance costs will rise, since building costs — and therefore the overall cost of the claim — have been inflated due to the delays.
Asked about Julie’s and Jacopo’s cases, Axa says: “We always aim to resolve every insurance claim as quickly and fairly as possible, but some cases are complex and involve multiple parties, which can prolong the process. While we can’t comment on individual cases, we recognise how frustrating delays can be.”
Again and again, we heard from FT readers who told us they suspected the frustrations they encountered while trying to make a claim were not just regrettable side effects of going through the process, they were the whole point of it.
They said it felt like insurers write their products to be deliberately ambiguous, designed to deter them from pursuing the full value they were owed, should they choose to make a claim.
“They bank on people rolling over and giving up,” says Tris, a commercial real estate agent in Clapham, south London, who has been pursuing a claim stemming from a leak in a neighbouring property.
The ABI rejects the idea out of hand.
“This is a highly regulated sector,” says Shepherd. If creating more complex claims was a business strategy, it would be a breach of the FCA’s consumer duty rules, he adds.
But financial analysts within the sector claim that throwing up obstacles to claims can be part of an insurer’s business strategy.
“There is a default position of, ‘if you are not happy then you can complain and contact the Financial Ombudsman’. Only at this late stage do customers get what they were due,” says Thomas Bateman, an insurance analyst at Mediobanca. “This could be months later, and is a huge point of friction in the process.”
“Most customers will not reach this stage, and therefore never receive fair value for the claim,” he adds.
“You almost need a degree to be able to understand the terms and conditions,” says Danny Beales, a Labour MP who has worked on insurance following flooding in his constituency that damaged more than 100 homes.
The FCA says it is “focused on raising standards” in insurance, pointing to recent action including its review of a controversial practice for vetting insurance customers. “We uncovered issues when we recently reviewed insurers’ home and travel claims handling. We’ll be holding them and their senior managers accountable for the changes needed.”
Jacopo says he knows only too well the hoops that customers must jump through in order to obtain the value of a product they are typically required to buy. He describes the insurance market as being structurally flawed due to “asymmetries of information” and pervasive subcontracting.
“The dialogue [customers have when they make a claim] is with administrators who are not close to the decision maker,” he adds.
Tris, the commercial real estate agent, recommends taking a more aggressive approach — and knowing someone in the industry.
His claim with insurer Homeprotect was dragging, he says. The group had switched his claims handler multiple times, leading to months of delays. A friend recommended using the technical terms understood in the industry, including saying he understood the claim could be “subrogated”, referring to a legal right to pursue a third party for a loss.
Tris used the term and added: “You go and kick whoever you need to kick, because at this point I’ve got a proper claim against you guys.”
He heard back the same day. “It was that language that made the insurer sit up and listen,” he says.
“We recognise how important it is for every customer to have their claim handled as quickly and smoothly as possible, and we continually review our processes,” Homeprotect says.
Tris adds: “I imagine there’s a lot of people who don’t have a friend in insurance.”
