The Financial Conduct Authority (FCA) believes customer service in the general insurance and protection markets has improved over the last three years, despite outcomes only improving by a couple of percentage points.
It also found that complaints about unsuitable advice and mis-selling across the industry had fallen during the period.
The regulator released the data as part of the outcomes and metrics for its now-ended Strategy 2022-2025 programme focused on 13 commitments.
Overall the FCA has seen mixed results in its strategies two key areas to improve oversight of appointed representatives (ARs) and in putting consumers’ needs first, and more widely across the industry, according to its own data.
The FCA monitored 111 metrics with 44 (39.7%) given a final grade of improved, 42 (37.8%) seeing no notable change, and 25 (22.5%) declining in outcome.
Putting consumers’ needs first
The metrics covering consumer needs showed similar results to those of the AR regime with seven improving over the period, seven largely unchanged and four declining.
One of those deemed to have improved was the one for general insurance and protection market customer service.
The figures were taken from the regulator’s Financial Lives Survey – comparing the 2020 baseline figure with 2022, 2023 and 2024.
The FCA set itself the target to maintain or reduce the proportion of consumers holding products who had a customer service-related problem with that product in the last 12 months.
This included issues such as sales pressure, poor customer service, IT failures, provider errors and other operational delays.
In 2020 8% of all customers (9% of those indicated to be vulnerable and 7% not vulnerable) in the general insurance and protection markets said they had suffered a customer service issue.
In 2024 this had edged down to 7% reporting problems – with 7% of vulnerable consumers and 6% of not vulnerable consumers doing so.
The FCA said this change was statistically significant when comparing all customers, but not statistically significant when comparing the two separate groups, however it therefore said it had improved this market metric.
Product pricing and advice complaints
Product pricing and customer support were the main areas to have seen a worsening situation.
In 2024 double the proportion of respondents to the Financial Lives Survey felt they were offered products at a price, or with terms and conditions, they felt to be “completely unreasonable” compared to three years earlier, 16% compared with 7%, a difference which the FCA said was statistically significant.
“While we have seen some improvements on fair value, rising costs from inflation and the cost of living may have put additional price pressures on consumers,” the FCA suggested.
Encouragingly, complaints about unsuitable advice and mis-selling across the industry have fallen with the number of complaints dropping significantly between 2021 and 2022 and staying low.
Uphold rates, excluding PPI cases, also dropped steeply over the period from 48% in 2021 to 26% in 2024.
“Fewer upheld complaints may suggest that firms’ conduct has improved. This shows progress against our outcome of making sure firms sell their customers products and services that meet their needs,” the FCA said.
It also noted that upheld FOS complaints about charges, fees commission and premium pricing had fallen.
AR oversight
During the three-year span the FCA took public action to tackle issues it had found within the appointed representatives regime.
In reviewing its final performance, the FCA reported seven metrics had improved, eight had seen little change and five had worsened.
Complaints data showed an improvement in the average number of complaints generated by principals compared to non-principals across two of the three key portfolios, the FCA noted.
In general insurance intermediaries, principals received approximately 70% more complaints in the original baseline measurement but this fell to approximately 20% fewer than non-principals. In mortgage intermediaries, principals have approximately 5% fewer complaints. However, among advisers and intermediaries, a spike in complaints among larger firms has widened the gap between principals and non-principals, with principals generating 470% more complaints than non-principals this year, and 270% more last year.
“The improvements in general insurance and mortgages portfolios have been largely driven by improvements by principals with higher revenues,” the FCA said.
“Smaller principals continue to generate more complaints than non-principals. A likely driver of the increase in the advisers and intermediaries portfolio is an increase in complaints about ongoing financial advice services.”
Scrutiny of ARs
The FCA said it strengthened scrutiny of ARs through increased operational capacity and stronger challenge on notifications and applications and improved the forms used by principal firms to notify it of the appointment of an AR.
In 2024, the rate of withdrawal by firms of AR appointments following scrutiny decreased to 3.7% and the rejection, withdrawal and refusal rate for applications to perform controlled functions related to an AR also decreased to 3.5% – on average a 42% reduction to the 2023 rates.
“This indicates improved due diligence by principals and improved assessments when submitting their applications,” the regulator continued.
“Throughout, we have continued to apply robust standards at the authorisation gateway.”
For the calendar year 2024, following supervisory interventions, at least 32 principal firms have applied to restrict their activities, two skilled persons reviews took place, and three principal firms applied to have requirements imposed at the gateway.
“Our FCA and Practitioner Panel survey 2024/25 showed that 60% of principal firms surveyed think that oversight of ARs has improved because of our actions this year,” it continued.
“Only 1% believe oversight had decreased. This continues the trend we have seen in surveyed firms reporting this improvement across their sectors.
“Our focus on improving principal firm oversight of ARs will continue, building on the progress in the last three years, to help raise standards across financial services.”
‘Progress against many outcomes’
Overall, the FCA acknowledged that all metrics had limitations, especially when dealing with complex and interrelated outcomes, but believed it was making progress.
“As expected, progress was not steady during the last three years. A metric’s movement is often affected by what other related metrics, and other parties, are doing,” it said.
“Factors beyond our control such as economic uncertainty and geopolitical instability also had an impact.
“Our metrics show that we achieved progress against the outcomes for many of our 13 commitments.
“These include putting consumers’ needs first, reducing and preventing financial crime, dealing with problem firms, improving the redress framework, enabling consumers to help themselves, strengthening the UK’s position in wholesale markets and improving the oversight of appointed representatives,” it added.
Metrics were based on three types of data: research data that record the attitudes, perceptions or behaviours of consumers or firms, market data that measure or are indicative of the outcome, and the FCA’s own data that records its activities to achieve the outcome.
Four key data sources were by the FCA to inform multiple metrics. These were the regulator’s Financial Lives survey, FCA and Practitioner Panel survey, the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS).