Underinsurance technical point

xronaldx

Home Protect (Avantia) policy booklet last year had the following explanation of under insurance.

"For example, if Your Contents are actually worth £50,000, but You have only listed £25,000 as Your Contents sum insured, any contents claims will be proportionally adjusted by 50% - a £10,000 Contents claim would be settled at £5,000."

This seems harsh and this year, at my renewal, they had changed it to:

"If the sums insured aren’t high enough, we’ll reduce any claim payment in line with the total premium shortfall. For example, if your premium was £750 but would have been £1,000 if the sums insured were adequate, we’ll pay no more than 75% (£750 ÷ £1,000 = 75%) of your claim."

This seems much fairer.  My problem is that my claim was a month before the renewal date so they are trying to apply the harsh penalty.  I suspect that the harsh wording has been changed after being challenged, perhaps via the Financial Ombudsman.  

Does anyone have any insight into this.  When I went online and generated a quote for building (£1 million) and contents of either 20K or 40K it made no difference.  Under the new regime I would be  covered for the 20K contents that I had paid the premium on.

cw8825

your claim is set under the terms of the previous year so settled on a 50% basis

It would have been your responsibility to check the correct sums on the statement. after all the insurer can hardly know what is sat in your house.

if it made no difference if price the higher (correct) value should have been declared. 

How much have you miscalculated by?

DullGreyGuy

xronaldx said:

Home Protect (Avantia) policy booklet last year had the following explanation of under insurance.

"For example, if Your Contents are actually worth £50,000, but You have only listed £25,000 as Your Contents sum insured, any contents claims will be proportionally adjusted by 50% - a £10,000 Contents claim would be settled at £5,000."

This seems harsh and this year, at my renewal, they had changed it to:

"If the sums insured aren’t high enough, we’ll reduce any claim payment in line with the total premium shortfall. For example, if your premium was £750 but would have been £1,000 if the sums insured were adequate, we’ll pay no more than 75% (£750 ÷ £1,000 = 75%) of your claim."

This seems much fairer.  My problem is that my claim was a month before the renewal date so they are trying to apply the harsh penalty.  I suspect that the harsh wording has been changed after being challenged, perhaps via the Financial Ombudsman.  

Does anyone have any insight into this.  When I went online and generated a quote for building (£1 million) and contents of either 20K or 40K it made no difference.  Under the new regime I would be  covered for the 20K contents that I had paid the premium on.

The first version is known as Averaging and was the industry standard until parliament passed CIDRA which deals with a wide range of matters in relation to the consumers making false declarations when buying insurance. It says that things should be dealt with in the second method if they accept the false information was given in a careless manor (if its reckless or deliberate they can now void the policy and avoid the claim). 

I've not looked at FOS cases recently but certainly there have been cases of insurers applying averaging post the introduction of CIDRA which the ombudsman said was reasonable. FOS however doesn't have precedent so just because they made a decision one way once doesn't mean subsequent decisions have to be the same (though most are). A quick glance does show they are now looking at CIDRA -v- Averaging - unfortunately many of the cases are complicated and so there is no clear steer on if one trumps the other

xronaldx

Thanks both for your answers.  BTW I found an example on the Financial Ombudsman site where they found that the Averaging method defined in the policy document was unfair and the claim should be settled on the % difference in the premium basis.  That makes me feel a little better.  When I estimated the value of the contents I was thinking about the value of the stuff rather than the cost to replace new.  

On their application they state:  "Imagine that you turned your house upside down and gave it a shake, the contents are what would fall out.  I was therefore surprised to learn that the carpets, curtains and even the curtain rails are contents.  Apparently, some people take curtain rails and blinds with them when they move out, along with the light bulbs apparently.  :-)

dunstonh

Apparently, some people take curtain rails and blinds with them when they move out, along with the light bulbs apparently.  :-)

In the past, taking curtain rails and blinds with you on a move was very common.

Light bulbs can be quite expensive nowadays.     Yes, you can get cheap Chinese bulbs on Amazon that last a year or two or you can pay for more expensive bulbs that cost more.