The average UK household spends over £1,500 a year on home and motor cover alone, yet a significant number of people only realise what their policy actually excludes when they try to make a claim. A poor claims experience is exactly what the Financial Conduct Authority (FCA) has put at the centre of its 2026 insurance priorities, following a super-complaint from Which? that highlighted how often consumers are left frustrated and out of pocket. For someone paying £500 a year on home insurance, a single rejected claim for water damage could cost thousands more than they ever saved on premiums.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The FCA’s new report, published on 24 February 2026, replaces the old portfolio letters and sets out four clear priorities: improving consumer understanding and claims handling, increasing access to insurance, supporting growth and innovation, and simplifying regulation. For anyone buying or renewing a policy, this matters because the regulator is now actively investigating how claims are handled, especially for home and travel insurance. If you’ve ever wondered whether your insurer is actually going to pay out when something goes wrong, the FCA is asking the same question.
Here’s what you actually need to know.
What the FCA’s 2026 insurance priorities mean for your cover
One term you’ll hear more often is Consumer Duty. This is the FCA’s rule that firms must deliver good outcomes for customers, not just follow the letter of the law. It applies at every stage, from the moment you buy a policy right through to when you make a claim. What I tend to notice is that many people still think of insurance as a product you buy and forget about. Consumer Duty means the insurer’s responsibility doesn’t end when you pay your premium.
How claims handling failures hit your pocket
The FCA is clear that many consumers still face poor experiences when making claims. This isn’t just about frustration — it’s about money. A claim that is delayed, underpaid, or rejected outright can leave you covering costs you thought were insured. The regulator’s focus on claims handling, distribution, and sales processes is directly linked to Consumer Duty, and it’s looking at outcomes at the point of claim, not just at the point of sale.
Following the Which? super-complaint, the FCA will continue supervisory and enforcement investigations into home and travel claims handling. It’s also broadening its review of oversight where claims processes are outsourced or sit under delegated authority models, including how those third parties are paid. That matters because if your claim is handled by a company your insurer has hired, the incentives might not be aligned with getting you a fair result.
What does this mean for you? If you’re comparing policies, don’t just look at the premium. Look at the claims process. Some insurers now publish claims acceptance rates and average handling times. The FCA’s focus on clear communications and prompt, fair claims responses means you should expect your insurer to tell you clearly what’s covered and what isn’t, and to handle your claim without unnecessary delays.
Three costly insurance mistakes people make
Buying on price alone without checking exclusions
The cheapest policy often has the most exclusions. A typical budget home insurance policy might exclude accidental damage, escape of water, or subsidence unless you pay extra. If your washing machine leaks and ruins your kitchen floor, you could be looking at a £2,000 repair bill that your £150-a-year policy won’t cover. The FCA’s focus on consumer understanding means insurers should make exclusions clearer, but the responsibility still falls on you to read the policy documents. What I’d do is check the ‘key exclusions’ section before I even look at the price.
Assuming all claims are handled the same way
Not all insurers handle claims equally. Some use in-house teams, while others outsource to third-party administrators. The FCA is specifically reviewing oversight where claims processes are outsourced, including how those third parties are remunerated. If your claim is handled by a company paid to minimise payouts, you might face more resistance. A practical step is to ask your insurer directly: “Who handles your claims, and are they employed by you or a third party?”
Ignoring the premium finance trap
Paying monthly sounds convenient, but it often means you’re taking out a loan to pay your premium. The FCA’s market study found that APRs on premium finance have come down since 2022, but it continues to monitor fair value. For a £300 annual policy, paying monthly could add £50–£70 in interest. That’s a 20% mark-up for the privilege of spreading the cost. If you can pay annually, you keep that money in your pocket.
How to choose cover that actually pays out when you need it
Match the cover to your actual risk
Insurance is about protecting against financial shocks you can’t absorb yourself. For a homeowner, buildings insurance is essential because rebuilding a house can cost hundreds of thousands. Contents insurance is about protecting your belongings — if you have £20,000 worth of furniture, electronics, and clothing, a £200-a-year policy makes sense. For a renter, contents insurance is just as important, and the FCA is working to increase uptake among social renters specifically. If you’re a freelancer, your equipment might not be covered under a standard home policy, so you need specialist cover.
Understand the claims process before you buy
Before you commit, find out how the insurer handles claims. Do they have a 24-hour claims line? Is there an app for submitting photos? How long do they typically take to settle a claim? The FCA’s focus on prompt and fair claims responses means you should expect clear timelines. If an insurer can’t tell you how long a claim usually takes, that’s a red flag. For a practical way to protect your home, you might consider a carbon monoxide alarm to prevent a claim in the first place.
Review your cover every year at renewal
Your circumstances change, and so should your insurance. If you’ve renovated your kitchen, your rebuild cost has gone up. If you’ve bought a new laptop, your contents sum insured needs to increase. If you’ve started working from home, your home insurance might need a business endorsement. The FCA’s priority on consumer understanding means insurers should make it easier to compare renewal terms, but you still need to do the annual check. Set a calendar reminder for your renewal date and spend 15 minutes reviewing your policy.
What’s changing in 2026 and beyond
The FCA will begin consulting on how it reflects the Digital Markets, Competition and Consumers Act 2024 (DMCCA) in its Handbook. This could mean new rules around how insurers sell policies online and how they handle your data. The regulator also intends to conclude its pure protection market study later in 2026, with an emphasis on closing the ‘protection gap’ — the difference between the cover people have and what they actually need. If you have income protection, critical illness, or life insurance, watch for changes that could affect your policy terms or premiums.
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| FCA Priority Area | What It Means for You | Action to Take |
|---|---|---|
| Improving consumer understanding, claims handling & service quality | Insurers must communicate clearly and handle claims fairly | Read policy exclusions; ask about claims process before buying |
| Increasing access to insurance | More options for social renters and those with mental health conditions | Check if you’re eligible for new products; don’t assume you’re excluded |
| Supporting growth and innovation | AI and new tech may speed up claims but need oversight | Look for insurers using tech to improve, not cut corners |
| Simplifying regulation | Easier to compare policies and understand your rights | Use comparison sites but verify details directly with insurer |
Frequently asked questions about UK insurance cover
Do I need buildings insurance if I rent? ▾
Will my home insurance cover me if I work from home? ▾
Can I be refused travel insurance for a pre-existing mental health condition? ▾
What is premium finance and why does it cost more? ▾
How long does an insurer have to handle a claim? ▾
What is the Consumer Duty and how does it protect me? ▾
Why the FCA’s 2026 priorities should change how you buy insurance
The regulator’s shift to annual priorities reports, starting with insurance, signals that claims handling and fair access are not going away as issues. For anyone buying cover, the practical takeaway is to treat insurance as an active purchase, not a passive one. Read the exclusions, ask about the claims process, and review your cover every year. The FCA is doing its part by putting pressure on insurers, but the person who benefits most from understanding the fine print is you.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read how to choose the right insurance as a young professional.
Sources and Further Reading
Feeling stuck on NHS waiting lists? How health insurance offers a way out — Explores how health insurance can fill gaps when public services are stretched.
Beyond the hospital: the holistic health insurance benefits you didn’t know — Looks at lesser-known extras that can add real value to a policy.
PwC (2026). FCA sets out 2026 insurance priorities. 🔗
Which? (2025). Addressing poor consumer outcomes in home and travel insurance. 🔗
UK Government. Digital Markets, Competition and Consumers Act 2024. 🔗
