Common reasons for rejected insurance claims

As the Financial Conduct Authority announces more investigations in its review of the insurance market, new Which? research reveals some common reasons why insurance claims are rejected.

Which? surveyed 4,800 members with car or home insurance and looked at policies from 10 car insurers and 10 home insurers commonly used by Which? members:

  • More than one in 10 (12%) who made a home insurance claim, and one in 20 (5%) who made a car insurance claim, had it fully or partly rejected.
  • All of the home insurance policies include a requirement for the property to be kept in good condition, but none of the insurers explained what this meant. One member told us that their insurer had refused a claim because they had not regrouted their bathroom tiles every year.
  • If you want to replace a lost, stolen or damaged item you normally need to provide proof of ownership, but some insurers take this to the extreme, for example members told us their insurer would not pay for freezer contents without a receipt.
  • Seven of the home insurers say you must report any accidental loss to the police or you won’t be covered. The other three won’t cover you for accidental loss outside the home if you haven’t reported the items to the police.
  • We saw many cases where car insurers have settled claims 50/50 even where the driver believes they have strong evidence that a car accident was not their fault, meaning they will have to pay an excess and may lose their no-claims bonus.
  • Of the general insurance complaints made to the Financial Ombudsman Service, 64% are about claims not being handled satisfactorily, and around half (51%) are upheld in favour of the policy holder.

Which? executive director, Richard Lloyd, said:

“We found examples of home insurance claims being rejected for some spurious reasons, and consumers unhappy with way their claim was handled. While most claims are accepted and paid out in full, a minority are not, and if your claim is rejected it could prove costly.

“As part of their review, the Financial Conduct Authority should look closely at home and car insurance to make sure insurers are not relying on exclusions buried in the small print to reject legitimate claims. If you’re unhappy with your settlement you should complain to the Financial Ombudsman.”

Notes to editors:

1.    Members of the Which? online panel were contacted in November 2012 and February 2013 and asked to participate in the claims satisfaction survey. (Those who took part in the November survey were not invited to take part in the February survey.) We received 4,796 responses from claimants in total. Of these 2,157 car insurance customers and 2,150 home insurance customers made claims. This is 22% of respondents with car insurance and 17% of respondents with home insurance.

2.    In May this year, the Financial Conduct Authority announced a review into the insurance market. On Tuesday this week it also announced the start of a six-month review of ‘add-on’ insurance. We welcome the FCA’s focus on problem areas and hope this will be the start of an improved insurance market that works for consumers. We want insurance policies to be written in plain English with key policy conditions clearly summarised.

3. For help with how to make a claim or a complaint to your insurance provider, visit the Which? Consumer Rights website.

To see the full investigation, visit the downloads section.

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