Insurance voided due to underinsurance. Help please!

suali_uk

Hi all, I'm new here. Don't know what to do and couldn't find anywhere to post so created my own thread here. Please merge if not appropriate on own. Anyway, my insurers sheilas wheels' underwriters have voided my policy from inception for underinsurance after a burglary claim they dragged on for 4 months saying they would make cash settlement in initial stages appointing 2 loss adjusters.... They say their underwriting criteria "will only accept a split of two thirds household goods and one third high risk items, and had I input the true split in cover they would not have offered a quotation". I have been insured for 11 years through different insurers and sheilas for past two years, never had to calim anything until now and they have left me devastated. The only reason we ended up underinsured is because we did underestimated my gold jewellery which has risen 4 times in value in recent times, oherwise insurance cover would have been adequate. Please See my letter to them below drafted from various web complaints i have seen and please advise what I can do to challenge this all the way and chances of winning?


FAO: The CEO Sheila's Wheels (Esure) insurance

Dear sir/madam


We refer to our email of 02/08/11 (as below) to which we have received no acknowledgement to date. This is to make a final formal complaint to you as the chief executive officer to review our claim and issue a final decision as per the terms and conditions of our policy.We have been forced to do some research on the issue of under insurance given our first and very disappointing experience of a claim and found out this is currently a national problem with insurers using loss adjusters to evidence under insurance and thereby abdicating their responsibility to deal with claims.

We consider the underwriters decision to void our policy from inception (for under insurance) is incorrect for the following reasons:

There was no malice on our part for the underinsurance, as ordinary lay people we have no idea how to accurately value our contents and have always opted for standard £30k protection which we considered was more than sufficient to cover our contents. The underinsurance misrepresentation is totally innocent and arises wholly due to my wife's long term held jewellery, which has risen 4 times the original value due to recent gold price rises. We had no idea that they had increased so much in value and actually estimated their value around the purchase price of under £3k. Our overall contents insurance amount does cover our losses and home contents fully, but the issue is around high risk goods cover being set at £10k and esure seem to class everything as high risk which we discovered from the loss adjuster.

The underwriters decision of voidance is a harsh decision, as it seriously affects securing future Insurance arrangements and puts our family and home at risk. Not to mention no recompense for the losses, stress and anxiety we have suffered from the genuine burglary and your protracted claims process, which until the last moment we were told we had to endure as you had to value our losses and to offer a pending a settlement.

The FOS will not look favourably at this voidance decision given your firm's track record declining claims on such grounds and current statistics which show!as many as 1 in 5 UK homes could be underinsured (ABI). We have seen many complaints on the web around this issue and are aware that the government is changing legislation to protect consumers as they state "On average, every household in Britain is unwittingly underinsured by 30% on their home contents policy, with the majority discovering the shortfall only when they make an insurance claim, at which point it is too late to rectify". Price comparison sites, which are used by many people like ourselves to buy home and building insurance, do not have a default option for the amount of contents cover consumers should have.!

The FOS state "We will support those insurers which reduce payments to policyholders where the total sum insured is clearly quite inadequate to cover the property at risk. However, assessing the correct amount is not an exact science and it is evident from our caseload that many policyholders find it a genuinely difficult assessment to make. Even where they have made a full and honest attempt to value all their household contents, they may be under-insured. We therefore take a sympathetic line where more detailed scrutiny by a loss adjuster suggests the sum insured may be short of the true replacement cost".

We don't understand why the policy was voided. If under insured as you say, quite simply the claim payment should have been reduced. We were informed voidence of a policy is for cases when the Insured does not supply information that, if it had been supplied, would have made the Insurer not take on the Policy.!We were told by your appointed loss adjusters that their recommendation has been for the claim to be settled as a genuine loss on a pro rata basis given the under insurance. Even after your appointment of a specialist investigator (peter lodge) to query invoice discrepancies and some other issues including contact with the police, his recommendation was for the claim to be settled as a genuine loss. !We have written evidence to this effect from Cunningham Lyndsey the appointed loss adjusters.!Please see emails from loss adjusters suggesting settlement of our claim after confirmed valuations from suppliers and review your decision in light of how we have been dealt with at the end by your underwriters.

Given the circumstances we await an early response to progress our complaint to he FOS if required.

Wait to hear from anyone. Thanks

suali_uk

Sorry my post is so long.... Not sure what info useful for comments back...

dunstonh

The FOS will not look favourably at this voidance decision given your firm's track record declining claims on such grounds and current statistics which show!as many as 1 in 5 UK homes could be underinsured (ABI).

The FOS take a fairly standard approach to these and it may not be one you like.

Under insurance is common but insurers tend to operate within a tolerance (which is what the FOS would expect ). So, a small amount of difference would be tolerated. However, a large difference would not. Larger differences tend to then be looked at as non-disclosure or incorrect disclosure.

The FOS generally look to see if your application was intentional non disclosure or accidental. You say it was accidental. So, if we accept that, the FOS would then expect the insurer to either pay out on the policy but deduct any extra premiums that would have been paid from the claim. However, and this is an important one, if the insurer would not have accepted had they been made aware of this information from the start, then they should void the policy and refund the premiums.

Are esure saying they would never have accepted cover from inception?

Price comparison sites, which are used by many people like ourselves to buy home and building insurance, do not have a default option for the amount of contents cover consumers should have.!

Not an excuse. You are making the choice to buy an off-shelf product aimed at the average household when you use a comparison site. If the product is unsuitable then that is your choice. No one forced you to buy something unsuitable. You could have bought one that was suitable.

The FOS state "We will support those insurers which reduce payments to policyholders where the total sum insured is clearly quite inadequate to cover the property at risk. However, assessing the correct amount is not an exact science and it is evident from our caseload that many policyholders find it a genuinely difficult assessment to make. Even where they have made a full and honest attempt to value all their household contents, they may be under-insured. We therefore take a sympathetic line where more detailed scrutiny by a loss adjuster suggests the sum insured may be short of the true replacement cost".

The reduction of the payout by the shortfall of the sum insured is the old legal position. The FOS position is more consumer friendly and is to prevent people being shorted when there is a small error, such as being 10% short. You were massively out. So, it looks more like non-disclosure or incorrect disclosure rather than underinsurance.

huckster

Good letter for which I have nothing to add. Just get it sent off by recorded delivery.

I think you have a good case. Esure are gaining a reputation for this, which must be down to having a very agressive underwriting team. I don't know how it works with all Insurers, but with some companies, the claims team refers such matters to an underwriting manager, before they agree the way forward. It appears that in the last year Esure have employed an underwriting manager who likes voiding policies.

suali_uk

Thanks for your replies dunstonh and huckster. For information sheilas wheels (esure) letter reads as follows

"it has come to light that you are underinsured and the household goods and high risks split is more than two thirds household goods and one third high risk items". They refer me to help texts that are available through the money supermarket website and clear questions about sum insured. Frankly I don't recall any of this info, we just estimated our contents value and worked out it wasn't worth more than the £30,000 standard cover provided by this policy. We didn't understand there had to be certain ratios which could void our cover and certainly have not found wording within the policy docs that define at which ratio of cover a policy could be voided. They state "it is the customers responsibility to make sure that the current value is adequate for all items including jewellery and gold".

They say "when you took the policy you input sum insured of £30,000, of which high risk items sum insured is £10,000. Following investigations your true sum insured is 37,050 of which your high risk items amount to £20,250." These figures are incorrect and fabricated by the loss adjuster they appointed who did his upmost to inflate values of what was left. When i challenged the loss adjuster about over valuing he got very shirty and said i should let him do his job and accept what he says as he does it everyday, he said he will recommend the claim is settled but at proportion of underinsurance for high risk items and we couldn't argue with his valuations. He was clear the total contents amount did not exceed £30,000, the issue was simply the high risk items exceeded the £10,000 cover available so esure would not pay above £10,000 and may deduct % for underinsurance amount. So how they now say the total amount was more than £30k I don't know. Moreover, despite underinsurance issue they proceeded with our claim appointing SBS and lms to value our goods for replacement saying it would likely be a cash settlement as due to underinsurance they couldn't offer full replacement values. However, now they say "Our underwriting criteria is such that we will only accept a split of two thirds household goods and one third high risk items, if you had input the true split in cover we would not have offered you a quotation."

They go onto say contracts of insurance are known as 'contracts of utmost good faith'. This simply means that the parties are under a strict duty to deal fully and frankly with each other. Policy holders must therefore disclose to the insurer all facts, which are material to the risk. A material fact is one which would influence a prudent underwriter in deciding whether to accept or continue with a risk....

If an applicant fails to disclose, or misrepresents a material fact the legal remedy available to the insurer is to avoid the policy from the date of the non-disclosure or misrepresentation.

In view of the circumstances, the misrepresentation when obtaining your quotation and the negligence shown in not knowing the value of the items you have, with the information available to you and the documents which clearly state the consequences of underinsurance , we have no alternative other than to treat the policy as void from the date of inception, that is, 2nd august 2010 and will arrange for all premiums paid from that date to be returned to you.

Unfortunately, as the policy has been cancelled and treated as void from inception we will be unable to deal with your claim and this will be closed.

Is their anything in their letter that strikes as areas of challenge I need to stress more firmly...?

dunstonh

Following investigations your true sum insured is 37,050 of which your high risk items amount to £20,250." These figures are incorrect and fabricated by the loss adjuster they appointed who did his upmost to inflate values of what was left.

Putting the actual calculations to one side as we cant comment on that, the £37,050 figure would probably be within tolerance by the FOS on a complaint. However, the high risk figure is more than twice what you insured. That is likely to be outside tolerance.

However, now they say "Our underwriting criteria is such that we will only accept a split of two thirds household goods and one third high risk items, if you had input the true split in cover we would not have offered you a quotation."

And that is the big snag for you. If they would never have issued cover from the start, they are allowed to void the policy and refund premiums.

If an applicant fails to disclose, or misrepresents a material fact the legal remedy available to the insurer is to avoid the policy from the date of the non-disclosure or misrepresentation.

And that verifies they are using the non-disclosure/incorrect disclosure guidelines provided by the FOS.

Is their anything in their letter that strikes as areas of challenge I need to stress more firmly...?

They are following the FOS guidelines for non-disclosure/incorrect disclosure. So, arguments on that front are going to be difficult.

You need to deal with the amount you are over on high risk items. How much do you think you have on high risk items compared to the loss adjuster figure of £20,250?

suali_uk

Ps. the total claim we made was for £16,043 which was made up of £2,691 electrical goods and £13,352 gold jewellery. The gold jewellery which caused the underinsurance was worth £2,769 as per original receipts but it was longstanding jewellery and we had no idea it had increased in value four fold until we were burgled and visited the jeweller to ask what it would cost to replace as per receipts we had. Had gold not risen so much our estimation of about £3k for the gold replacement would have been ok. Regardless of this mistake the insurers could just pay what we paid for the gold as per receipts taken by them and for the electrical goods lost as valued and receipts (under £6k), 10k short of our actual loss. Why leave us without insurance and brand us like criminals who have lied when it was just an oversight on our part not knowing what the gold was worth. Now we can't even get ordinary insurance cover.

suali_uk

They classed everything as high risk so we can't win. The loss adjuster stated esure are very different than most insurers in classing most things as high risk. However, he said we should get cash settlement upto £10 max high risk cover but this might be reduced by a % for under insurAnce. Then they all changed their minds....

suali_uk

So the fact that it was a genuine mistake underestimating the gold jewellery doesn't matter, the fact that this is what causes the underinsurance in its entirety doesn't matter. The fact that this is to claim only £16,000 on a total £30,000 Cover provision doesn't matter. Th fact that we hav never claimed anything before doesn't matter! They are happy take premiums and offer cover, when it comes to a claim they are allowed to abdicate their responsibility and give back the premium instead.

dunstonh

So the fact that it was a genuine mistake underestimating the gold jewellery doesn't matter,

it does matter if it was a genuine mistake compared to an intentional one. It means the insurer would have to pay out if they would have accepted the cover from the start. They would then deduct the extra premium that should have been paid from the payout.

However, if they would not have accepted cover from the start, then they should refund premiums and void the policy.

The latter appears to be what you are getting caught with. You may have made a genuine mistake but they shouldnt have to foot the bill for your mistake.

The fact that this is to claim only £16,000 on a total £30,000 Cover provision doesn't matter.

Its the high risk items limit that matters.

h fact that we hav never claimed anything before doesn't matter!

Irrelevant.

They are happy take premiums and offer cover, when it comes to a claim they are allowed to abdicate their responsibility and give back the premium instead.

You applied for insurance under false pretences. Yes it was a mistake on your part but why should they be responsible for your mistake?

read the last few paragraphs (under inadvertent) to see the FOS position.

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/46/46_non_disclosure_insurance.htm

huckster

If I were you sauli I would suggest that you make the complaint as you have written in an earlier post and see what happens. You really have nothing to lose by doing so and following it up with the FOS if necessary. The FOS will deal with such cases on a weekly basis and they probably are aware of recent underinsurance difficulties due to the increase in gold prices over a relatively short period.

My experience is that companies rarely make decisions to avoid policies due to underinsurance. They would rather settle the claim on a much reduced basis. The FOS will be aware of how companies operate and I suspect they already have similar Esure complaints they are looking into.