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Are Car insurers Angels or Sharks?

The vast majority of car insurers are neither angels nor sharks! They are business people who make legally binding contracts with motorists. They stick by those contracts, but they expect the motorists to do so as well. However, we are all human and sometimes mistakes are made by insurance companies, or by their customers.

How things can go wrong

Here is a nightmare scenario for a motorist. An accident occurs, a car is stolen, or it is damaged in some way but the insurer refuses to pay up for it. Worst still, third-party losses may be incurred; in other words someone else is injured or has property damaged as a result of the accident. The insurer pays up; but then sues the customer for the cost of the settlement.

What has happened here is that the insurance company believes that the motorist has not kept to the contract, and the usual reasons are:

  • when filling in a proposal form the motorist provided incorrect information
  • the car that the motorist was driving was not roadworthy
  • the car was being driven illegally
  • the circumstances were such that the motorist was uninsured
  • the loss occurred because the driver was negligent.

Errors on a proposal form

Mistakes can occur, and sometimes people forget about an accident or claim that happened several years ago. However, insurers base their premiums on the information they are given, and if this information is not correct they may have the right to withdraw cover, insist on an additional premium or even refuse to pay out on claims.

The majority of these companies do not take the answers on a proposal form as gospel, they do independent checks and they are able to do so because (a) they share information amongst each other and (b) the terms and conditions that a motorist has to accept before policy is issued usually stipulate that they have this right.

Driving an unroadworthy vehicle

This is an area where disputes can arise. A motorist may well be unaware of a latent defect, perhaps in a tyre or the braking system, which fails unexpectedly and causes an accident. On the other hand our motorist may be driving on tyres which are, clearly, completely worn out or with steering which is obviously suspect. In the first instance an insurer would normally meet a claim; but in the second one a refusal is a distinct possibility.

Driving illegally

This is a slight exaggeration perhaps, but crashing a car whilst making a getaway after a bank robbery would be pretty certain to be met with a claims refusal! Having an accident whilst unfit to drive because of drink or drugs is a much more realistic scenario, and a common one under which the driver not only faces severe legal penalties but would almost certainly be in breach of the terms of the insurance contract.

Driving whilst technically uninsured

Most people insure their cars for social domestic and pleasure purposes which covers going to the shops, pickinging the kids up from school, going off on holiday and most routine motoring. It does not however cover commuting to a place of work, for which an additional premium is usually charged. If the car is used for business purposes; in other words going to more than one place of business; then a social domestic pleasure and commuting policy wouldn't cover it, and neither would the car be insured if it was used for any form of business delivery, such as deliveries of small parcels or fast-food.

There are often excluded areas where a car is not covered, such as certain hazardous areas, or roads unsuitable for vehicles.

Having an accident whilst using a car for a purpose it was not insured for is likely to lead to a claim being refused.

Losses caused by negligence

We are all expected to take reasonable care to avoid losses. Some of the most common reasons for insurers to refuse to pay out if a car is damaged or stolen are:

  • Leaving a car unlocked, or a window open
  • Leaving valuables on display
  • Leaving a roof open
  • Leaving the engine running on a frosty morning to clear ice from the windscreen
  • Leaving the keys in the car

The perils of the filling station

One of the most frequent places for cars to be stolen is the filling station. Motorists in a hurry often leave a car unlocked or, even worse, leave the keys hanging in the ignition whilst they nip into the kiosk to pay. They are often only gone for a few seconds but that is long enough for an opportunist thief to steal contents from the car or even the car itself.

Under these circumstances a motorist making a claim is likely to be met with a polite but firm refusal.

Another frequent occurrence is a motorist mistakenly putting petrol into the tank of a diesel engine. Many policies do actually pay for the cost of the tank being drained and the fuel system cleaned out. However the usual stipulation is that the car is not driven!

Leaving a car parked in front of a fuel pump on a busy filling station is not likely to make a motorist very popular but driving a diesel engine which is running on petrol can damage or wreck it very quickly. If it is possible to do so without straining yourself then pushing it off to a safe area would be sensible, but if you are coerced into driving it bear in mind that the insurance company is hardly likely to pay for a destroyed engine!

What to do if a claim is refused

If you feel that the insurance company is acting unreasonably you should inform them of this as soon as possible and try to reach a negotiated settlement. If all else fails you could take your case to the Financial Ombudsman. You can get information about that Here.

There is no fee for the motorist to pay for this; the service is funded by a levy of all businesses which are regulated by the Financial Conduct Authority, which includes all those UK companies which sell insurance in Britain.

Does the Ombudsman Service handle many insurance claims?

During the year 2019-2021 they handled nearly 17,000 complaints about car insurers, about 11,000 of which were related to unpaid claims. Of these cases approximately 31% were settled in favour of the motorist; in other words the majority of complaints were turned down.

Why are most complaints to the Financial Ombudsman rejected?

In order to decide what is a fair and reasonable decision when there is a dispute about financial matters the ombudsman service will look at:

  • The precise wording on the policy
  • Whether or not any laws or regulations affect the judgement
  • What is normally accepted as fair in the relevant industry
  • Any other evidence; this could include medical records, photographs, witness statements et cetera.

The main reason why complaints fall down is the first one; the policy wording. Many motorists never read a policy before buying insurance, and assume that certain issues are covered by the policy when they are not; or they are not aware of exclusion clauses that are written into the policy.

If it is clear from reading the policy that what the motorist is claiming for was not covered by it then the claim will almost certainly fail. Sometimes however wording can be somewhat vague; in this case the outcome may well be different since insurers are under a legal obligation to spell out all terms and conditions in clear plain language.

What to do if you disagree with the findings of the Ombudsman?

You can always go to court and argue your case there. Do be aware though that the Ombudsman will have given a reasoned judgement and so it may be difficult to convince a court that it was an incorrect one; and costs could rise astronomically, so make sure you have deep pockets beforehand!

And finally .....

Before buying any insurance policy, read the documentation carefully. It has to be made available to you, and it has to be easy to read. There is no point complaining about a disputed clause later, if you have never even read it.

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