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Insurers continue to top FSCL cases but insurance churn by financial advisers a growing issue

Insurance companies are continuing to attract the most complaints to dispute resolution service Financial Services Complaints Limited (FSCL), but it is sales of replacement policies by independent financial advisers that is causing FSCL increasing concern.

In its annual report released today, complaints against insurers – predominantly in relation to travel insurance – once again made up the greatest proportion of cases formally investigated by FSCL, accounting for 58 out of 180 cases in 2015/16, or 32%. 

Chief Executive Officer Susan Taylor says that while overall figures remain low – accounting for 11 investigations in the last year – a growing number of complaints were arising out of the sale of replacement life, trauma and health insurance by financial advisers.

“These complaints raise a question as to whether some financial advisers are acting in their client’s best interests, or their own.”

The report states that FSCL expects this to be an increasing trend and notes the Financial Market Authority’s current investigation into insurance ‘churn’ – where a financial adviser has recommended their client change insurer every two years or so, for the adviser’s benefit (more commission), rather than the client’s.

“It is really important that consumers understand the potential risks of changing insurers, as the consequences of not being covered when you think you are can be disastrous.”

To help financial advisers avoid complaints, FSCL is calling for them to provide their clients with a comprehensive written statement when advising on replacement insurance cover, including:

  • the specific reasons for the proposed replacement
  • the key differences between the existing policy and the new recommended policy
  • the client’s duty of disclosure and the consequences of non-disclosure
  • clear and full disclosure of fees or commissions
  • how the replacement policy will be implemented.

FSCL’s annual report shows it handled over 3,600 consumer enquiries and complaints about financial service providers to the end of June 2016, up 40% on the previous year, and formally investigated 178 cases, a 10% drop.

Ms Taylor says that despite the jump in enquiries and complaints, awareness of its service – and that of other dispute resolution schemes in the sector – remained worryingly low and continued to be a focus area for FSCL.

“Of course, the best way for a consumer to find out about FSCL is for their financial service provider to tell them about us when they make a complaint, which we encourage our participants to do. It is also important that financial service providers recognise when a complaint has been made and that complaints are taken seriously.”

FSCL’s Annual Report 2015/16 is available on its website at