This blog is about how you might be insuring for the wrong amount of money, how that could lead to non payment of claims, and how to do your sums to avoid the pain.
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Insuring for the correct amount?
In 2015 the insurance act changed the way insurers tell people how they deal with cases where incorrect information is provided to them. Insurers have the choice of charging more, cancelling the insurance with or without giving a refund or cancelling the insurance as if it had never existed.
What hasn’t been made clear is that not insuring for the right amount is considered an incorrect disclosure by insurers. This means that guessing how much cover to buy could mean that, in the event of a claim, insurers will cancel the insurance, keep the premium you paid and not pay the claim. The PR surrounding the act made it sound like this was giving more power to policyholders. It was not. Even if it was, most policies still have awful small print that catches people out, whether they are buying cover for themselves or an organisation. None of it was removed as a reulst of the new law.
Why do claims get reduced?
Insurers are of the opinion that insurance buyers deliberately insure for an incorrect amount in order to pay less than they should. There have been cases where policies paid out for the higher amount so insurers made sure it wouldn’t happen again….with small print. They don’t make it clear on all their documents. The large print giveth and the small print taketh away.
LV Insurance are (almost) a household name. Yet a homeowner covered his £760,000 home with them. When the house burned down, they refused to pay him a single penny because he “didn’t use their website correctly”.
This is an extreme example yet it shows how insurers are using the Act against insurance buyers.
How does it affect claims?
I don’t think any of us want an insurer to pay people more than they paid for because that would increase our premiums. I do think we want the innocent to receive what they deserve.
The clauses fail to account for the terrible dearth of advice provided by insurers and now, sadly, low service standards from those that sell insurance via the internet.
Not to mention telesales operations and aggregators who sell sophisticated insurances like they are hot cakes.
After the event it is too late. There is little chance of squeezing blood out of a stone although people squander thousands suing insurers (£17,000 seems to be the minimum). I could regale you with the stories of the unsuccessful or you can look up Zurich v Mondeleez too see one example of how words, or small print, are important.
This affects everyone. Businesses have the most to lose by getting their sums wrong. Interruptions kill businesses especially when they receive £4000 per week rather than the £8000 it costs to keep the staff on. You can multiply these figures up or down to see how it would affect any business. It takes as much as 18 months for the credit available to affected businesses to run out. Banks have no problem taking the money or the assets when that happens. Indeed, banks sell insurance “without advice” which I consider wrong because their miss-selling can lead to people asking the bank for a loan when the insurance claim isn’t paid.
Wrap up. Doing sums is not easy yet it is imperative. If you don’t have the time or inclination get someone to do it for you. We have secured discounts for businesses and home owners who did want support when ensuring their insurance values are correct. Look at our testimonials where they vouch for the fact that we made it easy for them. We call it a health check although my brother calls it a sanity check.
Top tip. Check the health of your insurance now rather than waiting for the renewal date. You’ll be just as busy then yet the impending renewal date will feel like the sword of damocles.