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The UK financial watchdog has criticised life insurers for processing bereavement claims too slowly, urging them to digitise more of the process to save time and to improve their monitoring of response times.
The Financial Conduct Authority said “firms have more work to do in respect to poor and slow service” after carrying out a review of how life insurers handled bereavement claims — an area where it said customers are more likely to be vulnerable.
The review, based on data from 15 insurers representing three-quarters of the life protection market, found that it can take some firms up to four months to process a bereavement claim.
“Most firms were unable to meet some of their own bereavement claims process service performance levels within the period we looked at,” the FCA said. “Claimants are therefore likely to be experiencing delays resulting in poor outcomes and customer harm.”
The watchdog said consumers could be suffering “financial loss from delayed payments” as well as “inconvenience and emotional distress from poor customer services” and “a loss of consumer trust in the insurer”.
Insurers are supposed to “act fairly and promptly when handling claims” according to the FCA handbook. The watchdog also reminded firms of its Consumer Duty rules, which require them to consider consumers’ best interests and deliver good outcomes for them.
“We will use our regular engagement with them to reinforce our expectations, identify gaps in compliance and make sure appropriate action is taken to improve the service and support customers receive,” the watchdog said, adding that it would carry out further checks to see if insurers are improving and speeding up their service.
Many insurers are suffering from difficulties in recruiting and retaining experienced staff, particularly claim assessors, the FCA said.
“Without this key resource the bereavement claims process can quickly slow down and delays occur,” it said, adding that it usually takes three to six months to train new staff on bereavement claim processing and it can take up to a year before they are fully proficient.
“A combination of people leaving the industry, flexible and remote working arrangements, and a competitive and more transient labour market have left many firms short of experienced resources,” it said.
Insurers could save time by using more digitised processes — such as electronic “verification of death” to avoid the need for sending paper death certificates, it said. But this requires firms to accept higher “risk tolerance” in how much documented evidence they need.
The FCA found that on average firms took between almost two months and four months to process claims for term life insurance policies. It also found they took almost two months for whole-of-life policy claims and 20 days for “over-50” life plans.
It took firms an average of just over a month to process group policy claims, but that excludes the time taken by the policyholder’s employer to deal with their side of the process.
The watchdog identified shortfalls in how insurers were monitoring the speed and standards of their service to claimants. “Some were able to provide clear and comprehensive servicing standards and thresholds that monitored the process for bereavement claims in each of the four product categories,” it said. “However, for most firms, this was not the case.”