Has my son been mis-sold motor bike insurance

hopping_mad60

My 18-year-old son saved up and bought a motor bike. He took out insurance for a fully comprehensive policy at a cost of £2700 (the same as the bike cost). At that cost, he paid the insurance monthly. Within the first month, someone stole the bike from out of the garage.

The insurance company has said that if he makes a claim after the excess is taken into account and the policy is paid, he would owe them money, and the best thing to do is just to cancel the policy.

If this is the case, why did they sell a policy that would not pay out? Should they not have said we only offer 3rd Party or something similar. 

Has he been mis-sold an insurance policy?

pramsay13

They haven't missold the insurance policy and they are trying to help you out here. 
In hindsight you probably would have been better going to third party although sometimes it isn't cheaper. 
Think about it, you owe them £2700 for the year's insurance. You still owe this even if you don't have the bike anymore. 
They will pay you £2700 for the stolen bike but they will take off the excess. 
So to make a claim will cost you the excess amount so you might as well just cancel the policy. If you cancel the policy you might get some money back. 

DullGreyGuy

hopping_mad60 said:

My 18-year-old son saved up and bought a motor bike. He took out insurance for a fully comprehensive policy at a cost of £2700 (the same as the bike cost). At that cost, he paid the insurance monthly. Within the first month, someone stole the bike from out of the garage.

The insurance company has said that if he makes a claim after the excess is taken into account and the policy is paid, he would owe them money, and the best thing to do is just to cancel the policy.

If this is the case, why did they sell a policy that would not pay out? Should they not have said we only offer 3rd Party or something similar. 

Has he been mis-sold an insurance policy?

Did he pay for an advised sale? Almost all consumer general insurance is sold on a non-advised basis in which case its not "mis-sold" but "mis-bought" as its your responsibility to determine if a policy is suitable for your needs not the seller. 

Is he intending to buy another bike? Haven't done much work on Bike but for Car you would be able to transfer the remainder of the policy onto a new vehicle and would imagine similar would be the case for Bike.

With Car Comp is often cheaper than TPFT due to negative selection and so its not uncommon for young drivers with bangers never to be able to receive a payout for a total loss but Comp still makes sense rather than TPFT however its the buyers decision on if they want TPO, TPFT or Comp. It would be illegal for the non-advisory sales agent to tell them they should buy something other than what the customer has asked for. 

Hoenir

hopping_mad60 said:

Has he been mis-sold an insurance policy?

No. Insurance premiums are due upfront for the period of cover.  The choice to finance the cost over 12 months is a seperate matter. Paying upfront is considerably cheaper. 

Mildly_Miffed

hopping_mad60 said:

My 18-year-old son saved up and bought a motor bike. He took out insurance for a fully comprehensive policy at a cost of £2700 (the same as the bike cost). At that cost, he paid the insurance monthly.

He bought an ANNUAL policy, not a monthly one.

He then took out a finance product to spread the cost of the annual premium over 12 months.

If this is the case, why did they sell a policy that would not pay out?

It will pay out. His problem here is that in the very early period of the policy, that payout may well be less than he owes on the premium, because of the high premium relative to the value of the bike. The premium was high because of the perceived risk - which has been proven accurate.

This would be the same situation for a TPFT policy, because the theft angle would have been covered the same way.

If he'd bought a TPO policy, he would not have been covered for the theft at all, even if it occurred in month 11 of the policy, when it would be much more financially advantageous for him to claim.

The other big advantage with a comp policy is that, if he'd been in a collision he was held liable for, he'd have been covered (with the same caveat over relative claim value vs debt) for the bike... as well as for his gear, his injuries, etc. But if somebody else was probably liable but disputing it, he could still claim from his comp policy, whereas with TPFT or TPO, he'd have to persuade the other driver's insurer to accept the claim. From a hospital bed, that may not be easy...

facade

hopping_mad60 said:

My 18-year-old son saved up and bought a motor bike. He took out insurance for a fully comprehensive policy at a cost of £2700 (the same as the bike cost). At that cost, he paid the insurance monthly. Within the first month, someone stole the bike from out of the garage.

The insurance company has said that if he makes a claim after the excess is taken into account and the policy is paid, he would owe them money, and the best thing to do is just to cancel the policy.

If this is the case, why did they sell a policy that would not pay out? Should they not have said we only offer 3rd Party or something similar. 

Has he been mis-sold an insurance policy?

No.

If it had been stolen on the last day of cover, he would have already paid off the policy, and would have received a settlement of (value of 'bike - excess) which could have been £2000 or so. So it is bad luck that it was stolen at the start of the cover when he owes £2400 or so of the policy cost.

"Standard" insurance policies are for 12 months, and the full cost has to be paid on, or before, day 1. "Monthly payments" are paying back a loan of the full policy cost (which paid for the policy on day 1) over 12 months (plus interest- they don't lend big money for free)

Options now are

1) Don't claim, cancel the policy and see how much it will cost him to cancel. [(Remaining cost of policy + cancellation fee) - refund for unused months] 

2) Claim and see how much that will cost him- the remainder of the loan will have to be repaid and there will be an excess, so he will owe [Remaining cost of loan - (value of 'bike - excess)]

Things get more interesting if he is replacing the 'bike.

3)The insurer may be willing to transfer the remaining months of the policy onto the replacement 'bike (for an admin fee) after it has paid out (decent insurers will give you 14 or 28 days to organise a replacement, but the bottom of the barrel cheapies will terminate the policy when it pays out on a total loss/theft)

Then he can claim for the original 'bike as 2) which will cover most of the cost of the policy, and he can ride the replacement for 11 months for a very low price. Unfortunately he will have made a claim, so he won't get any NCB for this year (he won't if he cancels the policy either).  He is still down the cost of the 'bike but he is getting his insurance subsidised by the value of it.

Whatever, when he takes out another motor insurance policy in the next 5 years he still has to answer the question about having any accidents, suffering any losses, or making any claims with a yes because he either makes a claim (tick the box) or he is down the value of the 'bike (suffered a loss - tick the box) 

Aretnap

Mildly_Miffed said:

The other big advantage with a comp policy is that, if he'd been in a collision he was held liable for, he'd have been covered (with the same caveat over relative claim value vs debt) for the bike... as well as for his gear, his injuries, etc. 

Erm... comprehensive cover does not provide cover for injuries, possibly beyond a small token amount for very serious injuries.

Not sure whether a motorbike policy typically includes cover for helmet, leathers etc but a quick Google suggests it's more likely to be an add on than included as standard, and certainly a comprehensive car policy generally covers damage to the car only, not its contents or gear etc.

Altior

There is another factor isn't there? If he gets another bike. Of course with a claim and brand new young rider, then the following year's renewal could be out of reach. 

This is a very painful experience, he must be devastated. 

Altior

It was many moons ago so things might be different now, my car was written off at a similar age, third party cover. I was able to suspend the insurance until I got a replacement vehicle. It of course depends upon whether getting another bike in the short term is a viable option.