FCA Consumer Duty and claims handling: what to evidence

A claim is the moment a policyholder finds out what their insurance is worth. That is why the FCA’s Consumer Duty treats claims handling as a test of whether firms deliver good outcomes, and why the FCA’s recent claims reviews keep coming back to one question: can the firm show it?

This guide sets out what the Duty requires, what the FCA has said about claims, where loss adjusters and outsourced claims handlers fit, and what evidence a firm should be able to produce. It is general information, not regulatory or legal advice.

What the Consumer Duty is

The Duty is Principle 12 of the FCA’s Principles for Businesses: a firm must act to deliver good outcomes for retail customers. The detailed rules and guidance sit in chapter PRIN 2A of the FCA Handbook, supported by the non-Handbook guidance in FG22/5.

The cross-cutting rules

PRIN 2A.2 sets three obligations that apply to everything a firm does for retail customers:

• Act in good faith (PRIN 2A.2.1R): honesty, fair and open dealing, and acting consistently with customers’ reasonable expectations. One of the FCA’s examples of bad faith is doing the same activity faster or better when it benefits the firm than when it benefits the customer (PRIN 2A.2.3G).
• Avoid causing foreseeable harm (PRIN 2A.2.8R), by act or omission, including through a firm’s role in the distribution chain (PRIN 2A.2.9R).
• Enable and support retail customers to pursue their financial objectives (PRIN 2A.2.14R).

The four outcomes

• Products and services (PRIN 2A.3)
• Price and value (PRIN 2A.4)
• Consumer understanding (PRIN 2A.5)
• Consumer support (PRIN 2A.6)

Firms must also monitor the outcomes customers receive (PRIN 2A.9), and their governing body must review a report on those outcomes at least annually (PRIN 2A.8).

Key dates

• 27 July 2022: the FCA published the final rules in PS22/9.
• 31 July 2023: the Duty came into force for products and services open to sale or renewal.
• 31 July 2024: it came into force for closed products and services.
• 29 June to 18 September 2026: the FCA consulted in CP26/23 on the Duty’s scope and proportionality, including how firms in distribution chains can rely on each other. It expects to publish a policy statement and any new rules in Q1 2027. Until then, the current rules apply.

Why claims sit under consumer support and products and services

Consumer support. PRIN 2A.6.2R requires firms to make sure customers face no unreasonable barriers during a product’s lifecycle, and it names “submit a claim” explicitly. FG22/5 (paragraph 9.26) says consumer support should let customers get what they paid for, “for example by making a claim under an insurance policy”. Its poor-practice example is an insurer whose claims process deters customers, including a rigid demand for hard copies of all evidence. The FCA accepts that legitimate requirements exist, such as notice of the loss and adequate evidence of it, but says firms should not impose “unreasonably restrictive, rigid or arbitrary administrative requirements”.

Products and services. A product must be designed to meet the needs of its target market (PRIN 2A.3). FG22/5 links claims to this outcome directly: in its terminal illness benefit example, a hard-to-navigate claims journey and rejections made without proper consideration are matters for the products and services outcome, as well as for consumer support.

Consumer understanding also applies to claims. Under PRIN 2A.5.3R, communications must meet customers’ information needs, be likely to be understood and equip them to make decisions that are effective, timely and properly informed.

Claims handling also has its own long-standing rules. ICOBS 8.1.1R requires an insurer to:

1. handle claims promptly and fairly;
2. give reasonable guidance to help a policyholder make a claim, and appropriate information on its progress;
3. not unreasonably reject a claim; and
4. settle claims promptly once settlement terms are agreed.

What the FCA has found in claims reviews

Outcomes monitoring (June 2024)

The FCA reviewed board reporting from 20 larger insurance firms. Most monitored claim timeliness and declined-claim rates, but the FCA saw “little monitoring of whether overall good outcomes were being achieved in relation to claim settlements”. It also found monitoring often did not separate outcomes by customer group or characteristics of vulnerability. One firm that did found vulnerable customers had claims declined more often, and changed its claims processes and handler training as a result. The FCA said few firms could give clear evidence of monitoring leading to proactive action.

Motor total loss valuations (March 2024)

On written-off and stolen vehicles, the FCA said deductions “reflect the evidence available and can be robustly justified”, found that most firms “did not collect basic data on total loss claims”, and said firms should not dissuade customers from challenging a valuation. Where parts of the process were outsourced, firms should use MI to make sure this does not lead to systematically different outcomes. Most firms could not show this.

Home and travel claims handling (July 2025)

Across 23 home and travel insurers, the FCA found:

• weak oversight of outsourced claims handling at 5 insurers;
• generally inadequate MI on outsourced arrangements;
• committee minutes too thin to show meaningful challenge or decisions;
• some firms that did not identify vulnerable customers, or identified them but did not flag them on claims systems;
• gaps in how firms controlled and monitored cash settlements.

It also said insurers keep responsibility for intra-group claims arrangements and should oversee them as if outsourcing to an external third party.

Where loss adjusters and outsourced handlers sit

The Duty applies to firms in a product’s distribution chain whether or not the customer is their client (PRIN 2A.1.13G). Each firm’s obligations are interpreted according to its role and how far it can determine or materially influence customer outcomes (PRIN 2A.1.14G). A firm that cannot do either may have no Duty obligations at all.

Authorisation depends on the activity. Under PERG 5.7, loss assessors acting for policyholders are likely in many cases to be carrying on a regulated activity, while loss adjusting, expert appraisal and claims management on behalf of a relevant insurer are excluded (PERG 5.7.7G).

Where the work is outsourced, responsibility stays with the insurer. SYSC 8.1.6R says a firm that outsources critical or important functions remains fully responsible for its regulatory obligations. FG22/5 (paragraphs 9.40 to 9.41) adds that firms “cannot delegate any part of this responsibility to a third party” and should have systems and controls to monitor outsourced consumer support.

In practice, that means an adjuster, motor engineer or claims administrator usually needs to supply the evidence the insurer relies on, even when the adjuster has no direct Duty obligation of its own.

What a firm should be able to evidence

Timeliness

FG22/5 (paragraph 9.30) notes that the Duty sets no rigid service times, but unreasonable delay is a barrier. Evidence that each case met its target, the reason for every wait or pause, and how the firm handled any backlog. ICOBS 8.1.1R separately requires prompt settlement once settlement terms are agreed.

Communications

Keep a record of what the customer was told, when and why, including progress updates (ICOBS 8.1.1R(2)) and the explanation of any decision. Test whether letters are understood (PRIN 2A.5).

Vulnerable customers

PRIN 2A.6.2R requires support that meets the needs of customers with characteristics of vulnerability, and FG21/1 sets out the FCA’s wider expectations. Evidence how vulnerability is identified and recorded, how it changes the handling of a case, and whether outcomes for these customers differ.

Decisions and their reasons

Every decline, deduction or cash settlement should have a documented reason that is tied to the evidence and the policy terms, and was reviewed at the right authority level.

MI and outcomes monitoring

PRIN 2A.9 requires monitoring proportionate to the firm’s role. Where a firm has no direct contact with customers, it should monitor the outcomes of the service it provides (PRIN 2A.9.4G). FG22/5 (paragraph 9.53) lists abandoned claim rates, unusually low claim volumes, declined or successful claims analysis and time to resolution as useful data.

Mapping outcomes to evidence

Outcome or rule	Evidence for claims handling
Products and services (PRIN 2A.3)	Decline rates and reasons by product, showing whether cover pays out as the target market expects
Price and value (PRIN 2A.4)	Settlement outcomes against expected benefit; deductions with documented justification
Consumer understanding (PRIN 2A.5)	Copies of decision letters, timing of progress updates, communications testing
Consumer support (PRIN 2A.6)	Turnaround against target, reasons for pauses, evidence requests kept proportionate, vulnerability handling
Cross-cutting rules (PRIN 2A.2)	Comparable speed and quality whether or not the result favours the firm; conflicts identified and managed
Monitoring and governance (PRIN 2A.8, 2A.9)	Outcome MI split by customer group, root cause analysis, actions and their tested effect, minuted challenge
ICOBS 8.1.1R	Claims guidance, progress information, reasons for rejections, settlement dates

Practical evidence checklist

• Documented service targets for each claim stage, with version history.
• A reason recorded for every pause, wait or extension.
• A complete, time-stamped case history that cannot be altered after the event.
• Customer communications kept with the case, including the decision and its reasons.
• Vulnerability identified, recorded and reflected in how the claim was handled.
• Decline, deduction and cash settlement decisions reviewed at the right authority level.
• Reports quality-checked against a defined checklist before sign-off.
• A log of who changed, viewed or exported case data.
• MI on timeliness, declines and settlements that you can split by customer group and trace to individual cases.
• Oversight records for every outsourced arrangement: MI received, sample testing, actions taken.
• Minutes that show challenge and decisions, not just attendance.

How a platform can help

A case management platform such as PeritOS can produce much of this evidence as a by-product of the work itself. It supports versioned deadline (SLA) policies with email warnings before a breach, pauses that always need a reason, an append-only case timeline, and an audit log of changes, sensitive reads and exports. Report review includes section comments, a mandatory checklist and four-eyes sign-off, and dashboards drill down to the individual cases behind each figure.