Consumer claims on home and other insurance policies should now succeed more easily
We’re now just over a year into a new legal framework which could benefit you, as a consumer, if you have to make a claim on insurance and your insurer refuses to honour it.
The range of consumer insurance policies affected is very wide indeed.
In our experience, most people have a wrangle with an insurance company sooner or later.
This change to the law is something worth bearing in mind if you find yourself in dispute with an insurer over a claim you have made on a policy.
The fatal mistake – failure to disclose
Typically, the scenario is one where your insurer says that, at the time you took out the insurance (or renewed it), you failed to tell them about some important fact which would have influenced the level of premium – or even whether they would have agreed to insure you at all.
In those circumstances, the insurer would refuse to pay out on your claim, or could impose some other penalty, because you have breached the duty of “utmost good faith”.
This duty provides that it is your responsibility to tell the insurer about anything which could influence their decision whether to insure you and at what price.
A previous post on this blog considered how drastic the consequences can be if you (conveniently) forget to disclose a material fact to your motor insurer – such as the exact model of the car you are covering.
Where you deliberately mislead your insurer in order to get cheaper insurance for a car of higher value and specification than you say it is, you probably deserve what’s coming to you.
Where the consequences of failing to disclose were too severe
In some cases, however, insurers rejected complaints where a consumer had failed to declare a fact which most people would have said was completely irrelevant to the claim.
One example was where a critical illness policy failed to pay out where a woman developed leukaemia because she had not told her insurer about an unconnected ear infection.
You would often only find in the small print on insurance proposal (application) forms that you had to declare any criminal convictions or unrelated medical conditions.
A shift of onus from consumer to insurer
The reformed law puts the onus on the insurer to ask you the questions they want answered, say, about your medical or criminal history.
It is up to them to ask clear and specific questions.
The burden is no longer on consumers to volunteer what information they think may be required.
The consumer has a statutory duty to take reasonable care not to make a misrepresentation but, unless you deliberately mislead your insurer or are careless about what information is provided, the new rules should give you greater protection.
What is covered by the new rules?
The Consumer Insurance (Disclosure and Representations) Act 2012 came into force on 06 April 2013.
It applies to any insurance policy taken out for personal use including:
- Home insurance
- Car insurance
- Pet insurance
- Travel insurance
- Life insurance
- Critical illness cover
- Income protection insurance
- Health insurance, and
- Pension annuities
The 2012 Act also applies no matter what method you use to buy insurance, for example, through a comparison website.
Less “get outs” for insurers under the new scheme …
Insurers can no longer refuse to pay out claims on policies for honest or reasonable misrepresentations of fact. Such claims must be honoured in full.
Where there has been a “careless” misrepresentation by the consumer, the insurer can claim a sort of compensatory payment from the consumer which is based on what course the insurer would have adopted or policy it would have charged if the consumer had answered the question with reasonable care.
Insurers can cancel the policy as void – and retain any premiums paid – if the misrepresentation was “deliberate or reckless”.
… But scope for disputes remains
You can see that, going forward, there is bound to be scope for disputes over which kind of misrepresentation was made in the circumstances.
Where you are dealing with a “careless” misrepresentation, there may be issues over what the insurer says it would have done if there had been correct disclosure – and so what level of compensation the insurer can claim back from the consumer.
How we can help
The points above may help you to identify if you are in a situation where your insurer’s refusal to pay out on a policy may not be reasonable.
Feel free to contact us if you have any questions about this area of law at all. Any enquiries are free of charge and without obligation.
You can contact us on 01343 544077, by completing an online enquiry form or by emailing Peter or Marie through their contact details on this website.
Photo: Edit from BrickandMortar by Death to the Stock Photo
