TR15/6: Handling of insurance claims for Small and Medium-sized Enterprises (SMEs)

This report presents the findings from our thematic review which looked into the handling of claims from SMEs.

Why did we carry out this thematic review?

We wanted to understand the extent to which claims from SMEs, who are less likely to be sophisticated customers and who often exhibit similar knowledge and experience to that of retail consumers, were handled promptly and fairly. We also wanted to understand the role that different firms played in the handling of claims, particularly given the prevalence of outsourcing of claims by insurers.

TR15/6: Handling of insurance claims for Small and Medium-sized Enterprises (SMEs)[2] [PDF]

Who should read this?

This report is aimed at general insurance intermediaries including MGAs, insurers, third party administrators (TPAs), loss adjusters, loss assessors, relevant industry trade associations and organisations representing SMEs.

What was the scope of the review?

We selected 5 insurers, 10 insurance intermediaries (including 5 MGAs), and 10 loss assessing firms and  interviewed the senior management and individuals responsible for handling claims and reviewed claims files. We also met with loss adjusters and TPAs who had delegated authority for handling claims.

This review was limited to first party non-motor claims such as those arising from fire, flood, escape of water, theft and business interruption. We did not consider third party claims such as employers’ and public liability or professional indemnity claims. Throughout the review we concentrated on claims in excess of £5,000.

We also commissioned an independent research agency to carry out qualitative research[3] with 100 SMEs that had made a claim.

As larger claims tend to involve multiple parties we wanted to understand what role each party had played in the claims process. We therefore commissioned a specialist firm of loss adjusters to look in-depth at 20 claims[4], on a case study basis, drawn largely from the 100 SMEs included in our SME qualitative research.

What did we find?

Our findings included: 

• There was a gap between SMEs expectations and the claims service they received.
• There was an overall poor perception by SMEs of the claims experience.
• Claims were not always being managed effectively in the interests of SME customers – the most common cause of dissatisfaction was a lack of clarity over who was responsible for driving the claims outcome.
• There was often poor  communication between the different parties handling the claim and the claimant about progress which led to delays in reaching a settlement.
• A significant number of instances where the sums insured were inadequate to cover the loss incurred. The underlying reason for this was not always apparent but our review did highlight the material impact this could have on the claim.

What are the next steps?

We expect customers to be at the heart of how firms run their businesses and for firms to handle claims promptly and clearly communicate the reasons for any delays in the process.

We will engage with firms, senior figures in the industry, and relevant trade bodies to discuss the findings of the review, its expectations, and the changes that may be required to improve outcomes for SME customers.  

We will also provide feedback to the firms included in the review.

More information

FCA review highlights gap between insurance claims service and SMEs’ expectations[5]

Commercial Insurance Claims: Findings from Research with SME Customers[3]

Commercial Insurance Claims by SMEs: Report of Findings from File Reviews[4]

TR14/8 - Insurers’ management of claims – household and retail travel[6]