Consumer duty and the claims reality
Why good outcomes still need independent support
When the FCA introduced the Consumer Duty, it was intended to usher in a new standard for fairness, clarity, and customer support across financial services. For insurance, it placed the claims experience at the centre of regulatory expectations. Claims are, after all, the moment when a policy must prove its worth.
Nearly two years later, the industry is grappling with a gap between aspiration and delivery. Rising claim complexity, stretched resources, and rapid automation have made achieving “good outcomes” more difficult, not less. Brokers and MGAs are increasingly caught between regulatory expectation and operational reality, in a market that remains soft and continues to pressure pricing and claims performance.
This is the environment in which loss recovery insurance (LRI) has become not just valuable but necessary.
Consumer Duty: Strong principles, challenging reality
Consumer Duty places clear obligations on insurers to deliver good outcomes throughout the product lifecycle. But achieving this within the claim’s environment has been hampered by structural challenges inside many insurers.
For a time, many experienced claims professionals were diverted to Consumer Duty work, creating temporary gaps in frontline expertise and slowing decisions. During this period, less experienced handlers often took on complex cases, and surge events exposed capacity pressures.
At the same time, Consumer Duty has brought with it an enormous increase in reporting and governance requirements. Firms are producing dashboards, metrics, reviews and testing frameworks at unprecedented scale, but very little of this truly translates into faster, more accurate, or more empathetic claims handling. Much of the focus has moved towards reporting on outcomes rather than delivering them.
Market sentiment reflects this. MGAs, brokers, and consumer bodies consistently point to longer delays, higher decline rates, inconsistent communication, and falling satisfaction levels. When intermediaries and insurers both acknowledge the same issue, it signals an industry trend, not isolated cases.
The Which? Super‑Complaint: A warning the market cannot ignore
The Which? super-complaint provided a stark reminder of how the customer experience often diverges from regulatory ambition. Whether or not all the underlying data is accepted, the core message is clear: Consumer Duty has not yet produced the transformative improvement in claims that was expected.
Which? highlighted slow responses, unclear messaging, increased declines, inconsistent decisions, and limited support for vulnerable customers. Each of these issues points back to the same structural pressure, insurers are stretched, automation is accelerating, and claims are becoming more complex.
Why claims are becoming more contentious
The friction now common in claims handling is the product of several intersecting forces. Rising claims inflation has placed insurers under pressure to scrutinise settlements more tightly. Underinsurance is becoming widespread as rebuild costs rise faster than sums insured, surprising clients who believed they were fully protected. Maintenance-related clauses are being invoked more frequently, with questions around historic leaks, ageing roofs, wear and tear, and lack of documented upkeep.
Automation, while efficient, has introduced its own risks. AI‑driven triage can process volume, but it cannot navigate nuance. Borderline coverage cases, blended perils, commercial complexities and subtle causation arguments require experienced judgement. Increasingly, customers are encountering early-stage decisions that feel abrupt, inconsistent, or unfair, not because of intent, but because of system design.
Consumer Duty has not altered the power imbalance
Even under the Consumer Duty, the structural imbalance in claims persists. Insurers have specialist teams, technical expertise, and established processes. Policyholders are inexperienced with claims and likely do not fully understand the policy wording. The Duty requires fairness, but fairness is subjective and often deeply technical. Insurers are not required to act as a customer’s advocate, and they cannot be expected to challenge their own decisions on the customer’s behalf.
This is where claims escalate. This is where misunderstandings turn into disputes. And this is precisely where policyholders need independent expertise at their side.
Loss recovery insurance: Completing the consumer duty framework
The providers of Loss recovery insurance should not be seen as a challenge to insurers. It is a partner to the Consumer Duty’s objectives. It ensures that customers have access to guidance and advocacy equal in expertise to the resource’s insurers bring to the table.
From the moment a claim begins, LRI teams prepare evidence correctly, anticipate insurer questions, structure causation narratives, and ensure mitigation is appropriate and documented. Early errors are often fatal in claims; early guidance prevents them.
When insurers apply maintenance exclusions, underinsurance adjustments, or ambiguity in peril definitions, loss recovery experts bring technical challenge grounded in experience. They support vulnerable or commercially exposed clients by maximising Business Interruption cover, assessing reinstatement plans, escalating where required, and keeping the claim moving when the policyholder would otherwise stall.
Importantly, this is not adversarial. loss recovery services reduce friction, prevent complaints, and provide insurers with clearer information and a claimant who is better supported and more aligned with process. A well-managed claim is faster, cleaner, and more predictable for everyone involved.
Why independent advocacy matters more than ever
Consumer Duty has raised expectations, but it has not simplified the claims landscape. The pressures that complicate claims, rising costs, resource shortages, extreme weather events, and policy complexity have not disappeared. In many ways, they have intensified.
Loss recovery services bring clarity where communication falters, advocacy where customers are alone, experience where policyholders have none, and balance where the claims process remains inherently asymmetric. They help deliver the good outcomes Consumer Duty was designed to protect, even when operational realities make those outcomes difficult to achieve.
Conclusion: Good outcomes require more than just regulation
Consumer Duty sets a high standard and has reshaped the regulatory environment. But regulation does not resolve complexity; it does not provide customers with expertise; and it cannot replace the need for support when a business or homeowner is facing a crisis.
Policyholders need more than just rights. They need representation.
Loss recovery insurance provides that representation, ensuring that when a fire, flood, escape of water, or major business interruption occurs, customers have expert support capable of navigating the process and securing a fair, timely and accurate outcome.