Insurance is an essential part of life – and something that we can’t afford to skimp on, even in a cost-of-living crisis.
Insurance products cover a bewildering variety of subjects, including legal requirements (vehicle), essential (home, travel), the things you love (pet), your health (life, critical illness) and random or add-on things (gig cover, warranties). Ultimately, we insure the things that we can’t afford to lose or live without. That means when disputes arise, they can get messy depending on what’s at stake. And in the vast majority of cases, that involves a rejected claim.
Over the last two decades I’ve dealt with some desperately awful situations, like a family whose claim for a house gutted by fire was rejected over whether a box room constituted an extra bedroom and was therefore undervalued, or an individual with cancer, whose illness was not ‘terminal’ enough to claim on the terminal illness aspect of the policy he had.
These cases are extreme and fortunately not that common. But they do vividly highlight how devastating a rejected insurance claim can be.
Yet many of the people I speak to who have valid complaints about how their insurance claim was decided don’t pursue the matter. When I ask them why, they tell me that they ‘took the insurer/expert’s word for it’, or ‘they didn’t think there was any chance of winning’. This is so upsetting, because in my view they would have won if they’d fought back. In fact, the Financial Ombudsman upheld 31% of all insurance claims last year (more on them later). So it’s definitely worth taking things further.
But before we dive right in, it’s ‘caveats ahoy’ time! Insurance products are all extremely varied and operate in different ways with diverging T&Cs. But if you follow my guide, you can avoid the main problems and face down a rejected claim.
How to avoid insurance problems
The best way to avoid disappointment, is to understand what kind of insurance contract you’re entering in to.
When we buy insurance, it’s often a duty call. Most of us are more likely to spend more time scrutinising the comparison tables to find the best deal than looking at the actual contract itself. Yet many of the rejected claims I see come from people failing to tell the insurer crucial information that might affect their premiums – of if they would have been offered the policy at all. This is known as ‘non-disclosure’ and there are lots of different types, from deliberate to accidental.
As I mentioned, different policies often require different forms of disclosure, but some of the biggies to bear in mind are:
- Modifications and changes to what’s being insured. This can include souped up cars (even ‘go faster’ stripes!) or that conservatory you’ve added to the building (including the security system).
- Changes of circumstances. Most insurance companies will ask you to tell them if anything ‘significant’ happens that might change the level of cover while the contract is running or at renewal. Most of us forget to do this at the renewal stage but this can have a huge impact if we make a subsequent claim.
- Health and age. Medical conditions are one of the biggest causes of rejected claims when it comes to travel insurance, so it’s vital you scrutinise the list of what’s in and out and also mention treatments that you’ve had that required a prescription, just to be safe.
- ‘Claimable incidents. Even if you don’t make a claim, you need to tell your insurer if something has happened that could have been claimed on the policy. This is most important with vehicle insurance, even if the incident isn’t your fault.
- Other significant changes. You might not change your car or home, but if you start to use the vehicle or home for business purposes then that’s potentially a significant change that the insurer needs to know about.
When you look at all of that, you might think that all the responsibility is on you to remember all of this stuff. Well no. While you have to answer the insurer’s questions honestly as best as you can, by law, your insurer must ask you questions that are straightforward and designed to get you to tell them all they need to know. So, for example, if you are taking out travel insurance and they want to know all about your trips to the doctor, they must spell out what they want and over what period, not just ask you to tell them about ‘recent medical treatment’.
Lengthy insurance contracts can also be a bit of a nightmare. To shift things in your favour, the regulator says the insurer must give you a ‘key facts’ document that sets out the most important things you need to know (claim limits, key exclusions, excess fees and more). There’ll be other stuff lurking in the main contract that you need to know about too, but if your claim is turned down because of some obscure term on page 23 of a document that should have been brought to you attention, then you can complain.
What insurance problems can I complain about?
Few things with insurance are black and white. If you look at the ‘uphold’ rates published by the industry, 4 in 5 household claims are upheld and almost all vehicle claims. The reality is not quite so straightforward.
I’ve spotted a worrying trend where people are told on the phone that their claim is ‘unlikely to succeed’. I’m not convinced these rejections are actually logged at all, which might explain the high uphold rate.
The other factor is the rise of the ‘partial uphold’. This is where your claim isn’t fully upheld, but some of it might be (this counts as a full uphold in the stats). So some of your claim is paid out but not all of it. Alternatively, a claim may be reduced because you haven’t ‘disclosed’ something.
If your claim is turned down, partially upheld or fobbed off on the phone – or if you are unhappy with other aspects of the claim like the time taken to sort it out, other costs incurred, poor repairs or bad customer service – then you can make a formal complaint.
Unlike other financial complaints, insurance complaints can take twice as long, because you have to go through the claims process, then complain about the claim. But you can start a complaint about an insurance claim at any part in the process – you don’t have to wait until the claim decision.
Confused? I confused myself a bit there! Most insurance claims are about:
- An ongoing claim that’s not resolved
- The resolution to a claim
- Both things
How to appeal a rejected claim involving terms and conditions
When an insurer rejects your claim – in full or in part – it should write to you and explain why. This letter will usually give you a timeframe during which you can complain about their decision.
This is the bit that usually puts people off. After all, if insurance companies are relying on terms and conditions that are in the contract, there’s no point, right?
A big chunk of insurance claims are turned down because of T&Cs – either because of the conditions themselves or how they are being interpreted. Yet just because an insurer puts a term in the contract doesn’t mean it’s fair or being interpreted fairly. The Financial Ombudsman and the courts often overturn rejected insurance clauses on the grounds that the contracts aren’t fair.
This might be because:
- An important contract T&C is buried in the contract when it should have been in the key facts.
- The T&C is confusingly worded, or so hopelessly ambiguous it could be used to reject loads of things.
- The T&C is so vague or broad that you couldn’t possibly have known that you were breaking it.
- A key T&C has been changed when the contract renewed but it wasn’t brought to your attention. This can include a change in the insurer’s policy in how it applies the term.
All of these things and more give you loads of grounds to appeal. Here are a few examples of unfair terms that I’ve seen get overturned on appeal recently:
- Travel insurance claim for a stroke rejected. Non-disclosure of pins and needles. No prescription was given, the doctor didn’t think it was a big deal and the question about medical treatment was very vague.
- Home insurance claim for burglary rejected. Non-disclosure of type of locks on the door. The description of ‘disclosable’ locks in the T&Cs were too complicated and the clause was buried in the contract.
- Car insurance (warranty) claim declined. Insurer argued the damage was not covered. The vehicle had a safety display issue that occurred within eight months of purchase. The exclusion was technical, vague and not ‘within the spirit of the contract’.
The insurer ended up paying out in every case.
Other reasons to appeal a rejected claim
Lots of complains are about the insurance policy not paying out fully or over poor-quality repairs.
If you’re appealing the amount you’ve been offered by an insurer, turn detective. See if you can find examples of the actual costs you’d need to be ‘in the position you’d have been in had the incident not occurred’. So if your car has been written off but you think you’ve been given a cheap payout, then have a look in the official guides for vehicle value, and hit the Auto Trader or other magazines for alternative prices (get at least five alternatives if you can).
If you’re disputing the evidence of the insurer’s expert’s opinions, then counter with your own doctor’s note, builder’s quote or alternative expert view. Don’t spend a fortune on this though.
If you’re unhappy with how an insurer or their contractors have behaved, then put together a bullet point timeline covering what went wrong, what you were promised and what happened. Then…
Take it further
If the insurer rejects your claim, then they must write to you within a maximum of eight weeks from the date you made the complaint (on the phone, in writing, even by social media). This ‘final decision’ letter will explain their decision and your right to go to the Financial Ombudsman within six months of the date on the letter (so don’t stall).
The Financial Ombudsman is a free service and has advantage over the courts in the fact that it can look at what’s ‘fair and reasonable’ which means you stand a better chance of your case being upheld.
Featured in Times Money Mentor – Martyn James