The FCA's report on its thematic review into claims handling in the SME market highlights shortcomings but with reassuringly little sabre rattling. But there is an implicit threat of past business reviews where systemic problems are identified.

My concern arises from a rather technical interpretation of the comments in the FCA's press release. Linda Woodall, acting director of supervision at the FCA, said: "We expect all firms to carefully analyse the findings of the review and make any necessary changes to their approach to ensure that SME claimants are treated fairly. ... Where appropriate, firms may be asked to carry out an internal review to determine whether individual instances of poor claims handling reflects widespread issues within the firm." Whilst the identification of 'widespread issues' obliges firm to take remedial action to put things right going forward, there is also a potentially costly retrospective element.

Let me explain. SMEs are, typically, eligible complainants to FOS (under DISP 2.7.3(2)) and, therefore, the DISP rules apply (DISP 1.1.3) to the handling of their complaints. That means that the root cause analysis rules apply to firms dealing with any systemic issue. Under DISP 1.3.6: "Where a firm identifies (from its complaints or otherwise) recurring or systemic problems in its provision of, or failure to provide, a financial service, it should (in accordance with Principle 6 (Customers' interests [or TCF]) and to the extent that it applies) consider whether it ought to act with regard to the position of customers who may have suffered detriment from, or been potentially disadvantaged by, such problems but who have not complained and, if so, take appropriate and proportionate measures to ensure that those customers are given appropriate redress or a proper opportunity to obtain it. In particular, the firm should:

  1. ascertain the scope and severity of the consumer detriment that might have arisen; and
  2. consider whether it is fair and reasonable for the firm to undertake proactively a redress or remediation exercise, which may include contacting customers who have not complained." (my emphasis)

So, if insurers do as the FCA has asked, review their SME claims handling, and find that there have been systemic or recurring failings, they ought – according to the rules and of their own volition – to conduct a past business review and pay redress where found due. This is worth keeping in mind as you read the FCA's report and measure your claims handling against its expectations – and when designing or revising your claims handling systems to meet these standards in future.