The handling of insurance claims does not consistently meet SMEs expectations, according to the Financial Conducts Authority (FCA).
Its review on insurance claims handling found that claims were not always managed in the interests of SME customers. The FCA said there was an "overall poor perception by SMEs of the claims experience" and some SMEs felt they had not been treated fairly.
The review, which assessed the settlement and management of claims at 25 firms including insurers, intermediaries and loss assessing firms, said in "a significant number of cases", poor communication with the claimant resulted in delays in reaching a settlement.
The FCA's review, which examined the experiences of 100 SMEs and focused on claims of more than £5,000, reported "numerous examples of poor practice" in claims handling.
These include delays in the initial visit by loss adjusters, a lack of clarity over who was responsible for driving the claims process and inadequate sums insured to cover the loss incurred.
The FCA said loss adjusting firms were not typically paid by insurers in a way which financially encouraged them to reduce the cost of claims. But in the review, some SMEs saw these firms as trying to reduce the amount of claims.
An SME customer with a claim of more than £100,000 said: "Getting them to replace everything was a real penny-pinching process, in terms of the material they were using. They were always looking to cut corners."
The regulator will engage with firms and senior figures in the industry to discuss the findings of the review, its expectations and any changes that may be required to improve the outcomes for SME customers. The FCA will also provide feedback to the firms included in the review.
Linda Woodall, acting director of supervision at the FCA, said: "In an area where any delay could have a serious impact on a business or someone's livelihood, it is vital that claims are taken seriously and processed promptly - that means putting customers at the very heart of the process.
"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."
Hugh Savill, director of regulation at the Association of British Insurers, said the review found no evidence of insurers looking to avoid paying claims.
He said the review focused on claims of more than £5,000 and argued: "Most SME claims are under this amount and are handled in-house by insurers without the issues highlighted in this review."
Savill acknowledged communications between SMEs and their insurers and intermediaries needed to be improved.
He said: "Insurers and intermediaries will carefully consider these findings, including addressing the issue of under insurance, and make any changes necessary to ensure that SMEs claimants get the best possible claims service."
