Insurer Cancelled Policy due to their error - how to deal with this

Peter.B_2

Failure to provide accurate information to an insurer may result in the insurer cancelling a policy at short notice.  Unfortunately, insurers may also seek to cancel due to their own error in calculating a policy premium.  I understand the FCA view such a practice as "not treating customer fairly"  (which is I understatement).  I recently had to deal with Hastings Direct over such a matter with my Home Insurance renewal.   Has anyone else faced similar problems with insurers or been left without cover as a result?   Are sanctions and further rules required to prevent misuse of such cancellation terms by insurers? 

This is how I dealt with the problem (be firm and do not be put off fobbed off by implausible explanations from your insurer).................

I had received a renewal quote (having opted-out of auto renewal) at around the same time I had made a claim against the policy.  So when I renewed I made the point of double checking with the insurer that the renewal premium took account of that claim - they confirmed that it had so I was happy to agree the insurance contract at the stated price.  However, shortly after to policy commenced I received notice by post that they were cancelling my policy stating "We were recently made aware of a claim on your policy and due to this are no longer able to continue your cover, "  and "you'll need to find insurance elsewhere".    This left me in the invidious position of finding a policy with another company but the obligation to declare that my last insurer had cancelled my policy - likely result a very high premium.

After several calls to the insurer I managed to get a resolution, but only after standing firm and insisting the matter be escalated twice.  The insurer admitted their error but despite this stilled appeared to think they were within their rights to cancel on 7 days notice (outrageous).   When I pointed out that in may case they were a) clearly in breach of contact by not honouring the agreed price; b) referred to a past major ruling in which Hastings were fined by the FSA for cancelling thousands of motor insurance policies, and c)  threatened that I would pursue the matter, if necessary, to the FOS, they finally relented.    Rather than refusing to insure altogether, they agreed to reissue an identical  policy with the new premium and covered the difference in price.  A sum of money in compensation was also paid for my inconvenience.  I also insisted they provide a  letter stating the circumstances of their error so I could show this to any new insurer if there were any questions about the cancellation of the original policy.  

None of this would be necessary if the insurer had simply made contact to clarify matters rather than go for the 'nuclear' option of giving notice to cancelling my policy at short notice and refusing to provide cover going forward.  Why are there serious consequences if the insured makes a mistake, whereas insurers seem to think it is perfectly reasonable to terminate a contract if they make a mistake and that costs them money?    

Sandtree

Unless anyone can see the files from Hastings and their standard operating procedures its a little difficult to speculate what exactly has happened - its one of the reasons the FOS ask for both of these when dealing with an escalated complaint.

Its possible that something has gone wrong with their systems and not carried the claim forward to the new policy, then when the post purchase counter fraud checks are done a review on CUE has identified the undeclared claim triggering the cancellation process. Some insurers are on fairly terrible Policy Administration Systems and some have little real concept of a renewed customer -v- new customer - yet to find any great system (though havent worked in mass market consumer insurance for a while)

Peter.B_2

Thanks for your insights into the possible cause of the problem, which may be exacerbated by the fact that Hastings acts as a broker.    Perhaps Hastings classifies the savvy customers that opt out of auto-renewal as new customer?   

Surely tough conduct rules that tightly limit the right of insurers to cancel policies at short notice, with fines for systematic abuse, are require to protect customers.  This is because the consequence of being uninsured can be  material and in the case of motor insurance could result in a criminal conviction.  In this context, surely any insurer not having robust Policy Administration Systems is unforgivable.  

Unfortunately, once the FOS gets involved in these sort of disputes it is much too late.   I suspect in most cases the insurer gets away with it and innocent customers simply go elsewhere and pay sky high premiums, as well as having to declare the wrongly cancelled policy every year.

A cynic might suspect that some insurers use the post purchase checks and any apparent inconsistencies that may arise as  excuse to cancel, either providing cover for an error the insurer has made, or to ditch customers they no longer consider profitable.     Hastings was itself  fined  £735,000 in 2008 by the FSA  because it cancelled over 4,500 motor insurance policies at short notice because it found errors in how it had calculated premiums.  Hopefully, its systems have improved since then, but  perhaps not.

Sandtree

Peter.B_2 said:

A cynic might suspect that some insurers use the post purchase checks and any apparent inconsistencies that may arise as  excuse to cancel, either providing cover for an error the insurer has made, or to ditch customers they no longer consider profitable.

I would argue that its more common with brokers and other intermediaries than insurers and there are a few that get repeat posts on here about people getting additional premiums as they were asked for their V5 post purchase and it showed they'd owned their car 2 years 9 months not the 3 years declared. 

The key to insurance quotes is to ensure the information is accurate rather than guestimating... only a few question (eg date house built) says they accept approximate values. 

A broker may be totally unaware of a claim as the insured can often go directly to the insurer and cut the broker out of the loop. There is often a periodic feedback loop but even in this day and age that may well be a excel spreadsheet emailed at month/quarter end.

Peter.B_2

Errors by the insured can result in serious consequences, however insurers or brokers seem to face few consequences if they make errors.  Surely tough conduct rules that tightly limit the right of insurers to cancel policies at short notice, with fines for systematic abuse, are required to protect customers.  

If a customer has declared  information accurately on claims and other relevant information then the insurer/broker  must honour the agreed premium - to cancel a contract in such circumstances, when the insurer has made an error is a clear breach of contract.  For the insurer to not even to seek to discuss the matter first with the customer before cancelling illustrates the arrogance and distain some companies have for their customers.

[Deleted User]

Hastings again. Best avoided.