MSE News: New insurance laws will stop insurers wriggling out of claims

Former_MSE_Paloma · 16 February 2015 at 12:31PM

The Insurance Act 2015 will help stop insurers unfairly rejecting customers' claims due to wrong information given...

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New insurance laws will stop insurers wriggling out of claims

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magpiecottage · 16 February 2015 at 1:02PM

Whilst this is useful, the reality is that the Financial Ombudsman Service already considers what is fair and reasonable in the circumstances and for the last ten years all insurers have been legally bound by Principle 6 of the FCA (formerly FSA) Handbook, which says, "A firm must pay due regard to the interests of its customers and treat them fairly."

So I am not sure that this doesn't put a sticking plaster over a bandage.

dunstonh · 16 February 2015 at 1:20PM

This just seems to formalise what the FOS have been doing for a long time. So, it probably wont make a lot of difference with the bulk of firms.

redux · 16 February 2015 at 1:21PM

Over twenty years ago, I was looking into insurance against not being able to work due to accident or illness.

I disclosed a minor back injury some years earlier, with no lasting effects, and separately that I might occasionally visit a chiropractor.

One insurer offered me cover which excluded absolutely anything, either condition or injury, to do with the back or anything attached to or within 25 cm of it.

I pointed out this therefore arguably covered only the forearms and lower legs.

I sarcastically said I'd trod on a nail about 10 years earlier and had a tetanus injection. Would they thus also want to exclude anything to do with the blood, in case I got leukaemia 30 or 40 years later, for which no causative link could be shown.

The salesman said that about 20 per cent of claims are about backs, and they can be expensive. I asked then why there was no discount at all for excluding it.

A couple of weeks later another salesman was lecturing me about disclosing everything, and I established he occasionally had an issue worse than me for which he didn't get treatment and hadn't told his employer or insurer.

What am I saying here?

Whatever these improvements now, some people have had their lives affected for years by the past practices, including people who never bought cover in the first place as they were offered ridiculous or cynical terms.

BaldacchinoR · 18 February 2015 at 10:44AM

Can insurance companies still actuarially reduce a claim because the claimant has under-insured? If so, then its a pity if the new Act does not outlaw it. I think this practice is pure theft.

An example is if you insure your home contents for £50,000 and you make a claim for £21,000 but the insurance assessor decides you should have been insured for £75,000, your claim will be reduced to £14,000 i.e. by 1/3rd, because you were under-insured by 1/3rd. My argument against that is as you are insured for £50,000 that covers any claim up to that amount. That is the risk the insurance company is taking - it knows it may have to pay up to £50,000 and that is the amount of insurance you are paying for.

dunstonh · 18 February 2015 at 11:32AM

BaldacchinoR wrote: »

Can insurance companies still actuarially reduce a claim because the claimant has under-insured? If so, then its a pity if the new Act does not outlaw it. I think this practice is pure theft.

An example is if you insure your home contents for £50,000 and you make a claim for £21,000 but the insurance assessor decides you should have been insured for £75,000, your claim will be reduced to £14,000 i.e. by 1/3rd, because you were under-insured by 1/3rd. My argument against that is as you are insured for £50,000 that covers any claim up to that amount. That is the risk the insurance company is taking - it knows it may have to pay up to £50,000 and that is the amount of insurance you are paying for.

IIRC, this has been tested in law and the courts had no problem with it.

If you are only insuring for 75% of your contents then you should only get 75% of the claim.

rs65 · 18 February 2015 at 8:03PM

BaldacchinoR wrote: »

My argument against that is as you are insured for £50,000 that covers any claim up to that amount. That is the risk the insurance company is taking - it knows it may have to pay up to £50,000 and that is the amount of insurance you are paying for.

The majority of claims are well below the sum insured - in fact full sum insured claims are rare. Presumably you would want all low value claims settled in full so actual premiums would change very little. The risk the insurance company is taking would change very little

Although if you were happy for 1/3rd to be deducted from all claims, then the premium difference might be attractive. You'd just need to find an insurer who would provide cover with a 33% excess rather than a monetary amount.

MSE News: New insurance laws will stop insurers wriggling out of claims

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