Bankruptcy and Insurance

Kailasa700

Hi, I'm wondering if anyone can shed some light on why insurance companies ask if anyone has *ever* been declared bankrupt?

I declared bankrupt in 2007 and was discharged in Jan 2008 (early) so have been discharged about 4+1/2 years now. I am getting back on my feet and am now buying a house. I have tried to apply for buildings insurance for the property but when you read the small print (or sometimes it's under "assumptions") the majority of policies will not cover anyone who has been declared bankrupt or been convicted of a criminal offence. It has nothing to do with paying by installments - this was my first thought

Some policies even state that they will not cover you if anyone living with you has ever been declared bankrupt! It also affects car insurance, although this doesn't seem to be as commonplace as with buildings insurance.

Does anyone know *why* this stance is taken towards bankrupts - and also *why* it's not time limited - maybe to the 6 years the BR remains on file?

The insurance companies have no answers for me. Most simply state that I am classed as a higher risk....but can't tell me why. One at least had the honesty to tell me they simply didn't know!

Obviously there's nothing I can do to change the insurance companies stance on this, but if I'm going to be denied the best deals on insurance for the rest of my life I'd like to at least understand why! Can anyone help?! Thank you!

Micheal_shawn

Many insurance companies and their terms and conditions are different from each other and let me tell you one thing that when some one gets bankrupt no doubt it becomes difficult for him to again get back in the race of life if u don't have anything left.... But as we are in this open world and are on our own so when these type of thing happen when think that we have completely lost it .... Most of the insurance companies keep everything confidential and never tells to anyone the reason behind any thing and i must say that same was the case with my friend even if they know the reason behind it they aren't going to tell anything to you.;.

GazHatesBanks

Don't know about buildings insurance, but I found both car and contents insurance were easy to find using a local broker.

For the contents insurance they were actually cheaper than the online comparison sites, and only a few quid dearer (less than £10 on a £600 premium) for car insurance. Although the insurance company wouldn't allow monthly payments, the broker themselves let me pay the year's premium over 3 months with only a small admin fee added on so worth shopping around.

If anything I would have expected the contents insurance to be the most difficult to find as it has the highest potential for dodgy/exaggerated claims (after all you can't crash a 10 year old banger worth £500 and claim you had a new £40k Merc).

Having said that I would love to know if insurers could PROVE that there is a higher loss rate to people who are/were BR.

4$£&*(£$&*(!

For three years I tried to change things: https://forums.moneysavingexpert.com/discussion/1854585

To sum it up, I was pretty close to brokering a deal with the ABI. I just needed someone of profile to help. Martin fobbed me off. The MSE staff have ignored the paper I have written specifically for them. Everyone wished me well but so few did anything.

If you want to help, send Martin a PM and remind him his news team have an outstanding paper from me I emailed on 9/6, 25/6, 9/7 and 24/7. If they are diverting my emails to trash one of the team is welcome to PM me and I'll re-send it yet again.

This hurts me given the years I have invested in trying to change something unfair and I am asking for so little from Martin and his team. I've provided the evidence, I have supported my statements, I have paved the way with the industry. I now need a big name to sponsor this.

Martin hasn't joined me on this from my PM's and work, if others send him PM's also it could get him to reconsider opening this case up. Here's the link to PM him: http://forums.moneysavingexpert.com/private.php?do=newpm&u=13175

Heycock

HI. Its a simple reason. Sadly many Bankrupts have been associated with fraud before their BR. Insurance companies are bedevilled by fraudulent claims. Ergo, membership of a group who have a higher incidence of fraudulent activity than the general population, will be treated more harshly. Insurance is just another form of bookies. Work out the risk, offer the odds/premium.
And before anyone shoots me down in flames for suggesting we BR's are more likely to commit fraud than others, I'm not. I'm merely indicating insurer's perception.

But consider this. Be truthful to yourself. How many of us on these pages, pre-BR, have lied or been economical with the truth to get more credit?
I would suggest, and I'm looking in the mirror here, that it is a sizable proportion and THAT is why insures ask the question.

4$£&*(£$&*(!

So I'm a household which happens to have a former bankrupt in it, personally I have never made a claim and been insurance claims free for year upon year.

Let's ask the real question. How many bankrupts have made fraudulent insurance claims?

If the answer is several, then let's deal with that issue. If the answer is truthfully not many, then let's right that wrong. Basically Heycock, I'm not shooting you down but you're suggesting a large number of bankrupts have made fraudulent insurance claims. I have not seen a shred of evidence to support this, and before you make spurious claims like that again I'd like to see some evidence to support your prejudice.

wildheart83

So many bankrupts have been associated with fraud???????

I take real offence to your statement, I'd say that so many bankrupts have found themselves insolvent, which *might* mean they have struggled in the past to keep up with repayments (which again *might* include insurance) hence not allowing to pay in instalments.

Most insurance companies will class you as higher risk because you've defaulted in the past so you're obviously going to default (!) again. They don't seem to realise that once you've gone through BR you're less likely to ever default on anything again!

Have you tried Co-op? I use them for contents since i'm rented i don't need buildings but they were reasonable and no problems so far.

Good luck x

OutofDebt-NOT-OutofDanger

Heycock wrote: »

HI. Its a simple reason. Sadly many Bankrupts have been associated with fraud before their BR. Simply not true. The majority of BRs are due to a change in circumstances such as illness, loss of a job, failure of a business, etc. which means that previously manageable debt becomes unmanageable.

If fraud was a common there would be a lot of BRs with BRU/BROs (or be in jail) and whilst I don't have the statistics I imagine that these are relatively few and far between.

Insurance companies are bedevilled by fraudulent claims. So non BRs don't make fraudulent/inflated claims then? They are simply penalising an easy target for their failure to detect such claims. I can (to a degree) understand their reluctance when it comes to contents insurance as there is usually nothing to back up the claim of what's been lost/damaged.

But, am I as a BR more likely to have a car accident? No - in fact probably less chance as I would not be able to easily afford the excess or replace the car if it was written off.

Ergo, membership of a group who have a higher incidence of fraudulent activity than the general population, will be treated more harshly. Insurance is just another form of bookies. Work out the risk, offer the odds/premium.
And before anyone shoots me down in flames for suggesting we BR's are more likely to commit fraud than others, I'm not. I'm merely indicating insurer's perception. As Gaz mentioned - make the insurers PROVE it then!

But consider this. Be truthful to yourself. How many of us on these pages, pre-BR, have lied or been economical with the truth to get more credit? Some have, some haven't - I certainly think it's unreasonable for an insurer (or anyone else for that matter) to ASSUME that that's the case.

I would suggest, and I'm looking in the mirror here, that it is a sizable proportion and THAT is why insures ask the question.

I also found good value insurance through a local (independent) broker and although the car insurance isn't the cheapest on the market, I at least had the option to pay over 2 months instead of in one hit.

Heycock

There is some serious defensive misquoting going on here. I said "many" not most. If you doubt this, why is it that loss adjustors always do a credit check on claimants? When a struggling pub burns down why do the police run a credit check on the owners. I'm not defending their actions. Merely stating what they do. Don't shoot the messenger. Yes...the numbers of criminal bankruptcies are few in terms of total insolvencies but it is the bad apples which give everyone a bad name.
"Insurance companies are bedevilled by fraudulent claims". Fact. Why do you think your premiums are so high.

I think the problem here is that I am merely playing devils advocate in response to OP. I am NOT saying the insurance companies are right in their assumptions...I am simply telling you, as someone who worked in insurance WHY they make those assumptions.
My last comment concerning bankrupts of whom i am one, is that the reason a significantly large number of people go bankrupt is through having multiple credit card debt. How did they get all that credit? By being 100% honest on ALL their credit applications? If you KNOW you can never pay off your debts but continue borrowing then that COULD be construed as fraud.
Who is more likely to put in a false claim for £300 worth of defrosted freezer contents? The man with money in the bank or the man with an IVA he can't honour , the bailiffs knocking at the door and no bread on the table?

This is the insurers rationale. NOT mine.

And ultimately it's the insurer who calls the shots...not us.

It's not personal ...its business. And as I said, but some of don't want to admit it, insurance is a gambling business. Are you a greater risk than the next man. Yes or No. That's the way insurance has always run its affairs..that will never change.

Heycock

In the midst of all the argument I forgot what I meant to say in the first place! For Contents Insurance we went with Liverpool Victoria LV= a month post BR and have since renewed with no problems.

Buildings cover....a problem because of what I intimated
earlier. It is not unheard of for people in financial difficulties to torch their property to make a claim and clear their debts. Please please that is not MY opinion but it is the reasoning they use.

Car insurance problems usually arise around the monthly finance payment arrangement rather than the cover itself. Some companies do the finance in-house and this is less of a problem than when they farm the finance out to a 3rd party.
Admittedly it wasn't a problem for me as in my job there are only a handful of specialist insurers and if they didn't deal with bankrupts they'd have a lot fewer customers!

Life insurance ...not an issue. As long as you don't top yourself within a year of taking it out. They might link it to your debt problems.

alastairq

How did they get all that credit? By being 100% honest on ALL their credit applications? If you KNOW you can never pay off your debts but continue borrowing then that COULD be construed as fraud.

Or...hope?

personally I have been 100% truthful with all my credit applications.

Especially as, like many on here, my access to credit actually goes back many decades.

Much of the credit access doesn't stem from new applications...but from the wishes of CC companies to retain the customer, by offering ever more credit on top of the existing borrowing.

Remember, the CCs don't' make money on what they 'lend'...but on the build-up of interest and charges.

Not many years ago, there were moves afoot within the banking sector to 'get rid' of long-standing customers who always settled their accounts on time.

Simply because, they don't make money for the banks and CCs.


Any lack of honesty must also be levelled at those Customer Sales staff who encouraged ever greater amounts of credit being taken out, simply because they got a bonus for garnering increased custom.

So the dishonesty leis with the financial industry...for not lending in a responsible manner.

Of course, these days, they are lending so responsibly that they aren't lending at all!

No ......the real reason behind the anti-BR element must lie in good old-fashioned bigotry.....remember who actually owns the few major insurance companies?