Concerns have been raised that competition int he market is leaving people without the policies they need.
People need to be given more help to understand home and travel insurance products, with growing concerns that price competition is leaving people without the right policies.
A report from the House of Lords Financial Services Regulation Committee raised concerns about a lack of consumer understanding around what is and is not covered by policies.
Home and travel insurance can cover a wide range of risks - but with people focusing on the price of the policy, rather than its actual value, they warned customers could be left shocked when claims were denied.
The committee heard claims that price competition has led to the “hollowing out” of insurance products - with products having reduced levels of cover so they are more competitive on price.
It also said it had heard from a range of witnesses, including insurance companies, that particular elements of insurance products were consistently poorly understood by consumers, including the definition of storm damage, and that they may not be covered for wear and tear.
The report said: “Insurance products are inherently complex and their value is often unclear until a claim is made. This poses a challenge for consumer understanding. We are concerned that despite the problem being widely recognised, common misunderstandings persist.”
The committee raised concerns that, while price comparison websites have driven competition, they have a lack of readily available and comparable data on elements of product value other than price. This inhibits comparisons on product value, particularly data on claims outcomes, the committee said.
And it warned that the impact of poor consumer understanding of products often becomes clear only when a claim is made.
Firms have a duty to support consumer understanding on complex insurance policies under requirements set out by the Financial Conduct Authority (FCA).
The FCA had reported that in 2025, claims acceptance rates were between 62–71% for home insurance and 83–86% for travel insurance, compared with 99% for motor insurance.
Committee chairwoman Baroness Noakes said: “Comparison websites have made it easier for people to find cheaper insurance, but the lack of good data on other aspects of product value means that many home and travel policies are chosen on price alone.
“The industry and the FCA need to speed up and improve their efforts to help people better understand home and travel insurance, especially what their policies do and do not cover.
“It is concerning that many of these problems around consumer understanding and comparable data are well-known among industry and the FCA, but that significant progress has not yet been made.”
According to the FCA, in 2024 around 22 million home insurance policies were in force in the UK, amounting to more than £7 billion in premiums, and more than 6.8 million travel insurance policies were in force, totalling £1.2 billion in premiums.
The FCA is working with consumer groups and industry to improve understanding and outcomes, including on wear and tear in home insurance and disclosing medical conditions for travel insurance, and an update is expected by the end of the year.
An FCA spokesperson said: “Insurance should provide peace of mind and fair value. As the report notes, we had identified similar concerns to the committee – and are improving claims handling and helping consumers make informed choices.”
A spokesperson for the Association of British Insurers (ABI) said: “Our members take their responsibilities under the consumer duty very seriously and are committed to offering accessible products that provide fair value.
“Doing more to help customers make informed choices based on their circumstances and not price alone is a priority for the industry.”