GI claims handling: what can insurers and intermediaries learn from recent FCA reviews?

At a glance:

• Following the FCA’s Home and Travel insurance claims handling reviews early in 2026, UK general insurers face continued pressure to evidence fair, consistent and well-governed claims handling beyond home and travel lines of business.
• Strengthening claims Management Information (MI) is a top priority. As the FCA increases its use of AI and technology to interrogate larger datasets, insurers will need better MI across products, perils, and cohorts to identify poor performance, evidence good outcomes, and respond to supervisory challenge.
• We are of the view that insurers’ claims governance frameworks will need to improve to meet the FCA’s expectations. Firms need to ensure there is clear ownership and escalation routes in claims processes and that cross-functional review committees can provide effective challenge, review product and claims outcomes, and drive remediation where needed.
• Third Party Administrator (TPA) oversight remains a key risk area for firms in the claims supply chain. Over reliance on TPAs without appropriate oversight increases the risk of poor customer outcomes going undetected. Regulatory scrutiny in this space makes oversight, Quality Assurance (QA) and accountability key. It may also prompt insurers to review their outsourcing and delegation strategies.
• We believe that technology will be the main driver to enhance insurers' claims operating models and help manage costs. AI-enabled claims triage, live dashboards and real-time data can help firms improve claims management consistency, TPA oversight and customers journeys. This will also help respond to a high volume of AI generated claims and support new claims models, such as parametric products, and prompt insurers to reassess what part of the claims supply chain should be transformed or remain outsourced.

1. Insurance home and travel claims handling challenge: not over yet

After the FCA’s Home & Travel insurance review and its Which? Super Complaint’s response, more than ten insurers were asked to review their claims handling processes in Q1 2026. However, supervisory pressure on insurers’ claims handling does not show sign of abating, with the launch of the House of Lords Financial Services Regulation Committee’s inquiry into how home & travel insurance is regulated with a renewed focus on claims handling.

Looking ahead, the FCA’s data-led supervisory model will increase scrutiny over firms’ data management and quality with a focus on distribution models and claims outcomes. The upcoming GI value metrics review will require firms to gather and report new and/or different data points, potentially surfacing new market issues. As the FCA continues to incorporate AI in its supervisory toolkit, it will be able to analyse much larger volumes of granular data in a short timeframe. Insurers also need to be proactive in their use of AI models and data to help monitor customer outcomes effectively.

In this article, we identify three priorities for firms reviewing their claims handling processes: outcomes monitoring, TPA oversight and the impact on consumer understanding (Diagram 1). Across the three priorities, the article also explores how the use of technology by both firms and regulators will create new opportunities and threats for firms.

2. Monitoring claims handling outcomes: what does it take to get it right

Good quality and timely claims handling MI are at the heart of delivering good claims outcomes. Improving claims handling depends on better MI, clearer escalation routes, effective root cause analysis and technology-enabled solutions:

• Claims handling MI: In the Consumer Duty Board Reports review, the FCA expressed concern around some firms' ability to collate data of sufficient quality and granularity¹. For example, some insurers may lack data granularity to identify claims by peril type (e.g., storm claims for home insurance). More detailed MI is needed to identify issues across perils, customer cohorts, decision types, and third-party reporting touchpoints. For example, the use of cash settlements for complex and higher value claims may not be appropriate for vulnerable customers.
  

• Investment in data infrastructure is crucial for risk management, but it needs the right governance. Without escalation channels and committees to challenge and interpret the data effectively, the added value of granular claims MI is limited. For example, if “wear and tear” exclusions (e.g., roof moss) are a leading cause of claims declinatures in storm policies, this issue may not be signposted in MI dashboards. Claims committees will need the right data and adequate time to challenge metrics and reassess outcomes. A single IT interface gathering product-relevant MI can reduce the time spent gathering claims and provide a consistent view to enable good governance.
• Effective root cause analysis (RCA): When firms identify worsening outcomes through claims handling MI, they need to determine if the root cause lies with the product, process, people, TPA or other issues. Some insurers might have gaps in their processes to deal with issues identified and an inconsistent approach to escalate issues to the C-Suite/Board. Insurers should also have the right processes to identify root causes and then remediate, for example by changing product features, policy wordings, journeys, communications, claims processes or TPA agreements.

3. Third Party Administrators (TPAs) under the magnifying glass

The UK TPA market is expected to keep growing over the next five years, with an expected Compound Annual Growth Rate (CAGR) of 7.2%. Some TPAs claim to drive administrative savings up to £4,500 per claim; and more than 90% of the Managing General Agent (MGA) members of the ABI outsource their claims management to third parties.

Source: NMSC.com

Whilst TPAs provide expertise and economies of scale to drive operational savings for insurers, the FCA review highlighted recurring issues across the TPA market.

Firms should prioritise the following areas when managing TPAs:

• Effective oversight depends on quality and timeliness of TPA data, as well as the narrative supporting these: many insurers rely on MI from TPAs that may be 30-60 days out of date. This reduces firms’ ability to spot emerging harm or evidence effective control over their claims processes. Weak TPA oversight and TPA accountability can widen the gap between insurers’ expectations and reality. Even where TPAs operate under defined service-level agreements (SLAs), these are not always consistently met in practice. For example, in home insurance, delays in deploying surveyors, weak adherence to service standards and incomplete documentation can result in a gap between contractual expectations and actual delivery.
• As TPA models grow, MI dashboards, automated data-quality and service level checks and live alerts are becoming increasingly important. These can help identify outlier outcomes early and improve alignment between insurers’ expectations and what TPAs deliver.
• Assessing the commercial impact of higher demands on TPAs: Regulatory pressure is likely to raise expectations for TPAs and increase service costs. Without new technology (e.g., live dashboards or AI agents), TPAs and insurers may struggle to balance commercial and regulatory expectations. Insurers might consider whether bringing some processes back in-house with new technology is a better pathway than relying solely on TPAs.

• TPA ability to withstand surges: The TPA model relies on economies of scale and lean operational costs, making claims surges challenging. As customers increasingly use AI to lodge complaints, frequency of surges is likely to increase. Insurers need to review the contract flexibility and how they can access additional support in stress to ensure resilience. In the event of a claims surge, TPAs need to continue to deliver at appropriate speed while documenting decisions appropriately.

4. Customer understanding: bridging the gap between reality and customer expectations

The FCA’s Financial Lives Survey highlights that UK customers have insufficient knowledge of their insurance policy coverage. The FCA is particularly interested in how the distribution of GI products can affect customer understanding.

Weak customer understanding and poor distribution controls can translate into low claims ratios and potential misselling:

• Claims friction, walkaways and high declinature rates can indicate a gap between the product sold and the customer’s expectation of the product coverage. The FCA’s home and travel claims reviews found poor outsourced oversight, delays, high complaint volumes and insufficient MI. In addition, only 32% of storm damage claims in its 2024 sample resulted in payment. Which? also pointed to firms’ repeated evidence requests, weak communication and frustrating treatment of customers in its super complaint. Firms should track walkaways, document-related drop-offs, complaint themes, settlement delays and declinature rates to identify whether the claims journey, policy wording or customer understanding is creating misaligned expectations.
• Settlement practices and remuneration can affect whether customers understand their claims options. Firms should assess whether cash settlements, loss-adjuster instructions, or TPA fee models steer customers towards lower-cost outcomes without explaining the trade-offs and relative policy limitations clearly. This is especially important where customers may not understand the difference between a quick cash offer and full reinstatement, or where vulnerability affects their ability to challenge a proposed settlement.

Conclusion

Regulatory scrutiny over claims handling in the GI sector has raised the bar for insurers. We identified three key priorities for firms to act on: more granular claims handling MI, stronger oversight of TPAs involved in the claims handling process, and a greater focus on customer understanding of the product in poor claims outcomes. Strong governance, a well-designed customer sales and claims journey, and good MI, enabled by technology will help firms to deliver to these three priorities.

References:

1 Consumer Duty board reports: good practice and areas for improvement | FCA: “ […] some reports failed to include thresholds that were being used to monitor MI. Instead, they relied on high-level claims such as ‘products are designed to meet the needs of the target market’. In some instances, RAG ratings and thresholds were stated. However, reports often failed to provide well-reasoned justifications for setting thresholds for MI indicators at certain levels. […] Comprehensive view across distribution chains: Some reports did not contain evidence that an appropriate amount and types of information have been shared between the firm and third parties across the distribution chain. […]