FOOL'S EYE VIEW
Know Your Rights On Insurance

By Jane Mack (TMFJane)
November 5, 2002

The insurance industry has a big fraud problem. In fact, according to the Association of British Insurers, fraudulent claims amounting to about £1 billion are detected each year so goodness only knows how much they get conned out of by people getting away with it. It must be a huge sum of money and, unfortunately, the rest of us innocents get to finance their losses through higher premiums and lower pay-outs.

A few weeks ago I wrote about how our car was broken into on our way back from France. Apart from a pair of shoes and a few bottles of wine, more than 80 CDs were stolen which we reckoned would cost more than £1,000 to replace, not least because there were a few double albums on the list.

The company we bought our travel insurance from sent us a cheque at the weekend for £361.95.

Now, it's quite possible that I'm being inordinately thick but I was under the impression that the reason for buying travel insurance was to ensure that, should the worst happen, you get compensated as far as possible for your losses. There was certainly a £50 excess on my policy but it's fair to say I was expecting a cheque for a reasonable sum of money that would allow us to replace the majority of our stolen CDs.

The letter states that the cheque represents 'full and final settlement' of our claim and it adds: "Please note that the above payment includes an overall valuables limit of £300 as per the terms and conditions of your policy".

Hmmm...

Well, apart from the fact that the overall valuables limit of our policy was actually £200 (so they've got that bit wrong for a start), the clause defining the meaning of 'valuables' doesn't say anything about CDs. It mentions 'audio equipment' but not CDs.

To my mind 'audio equipment' means things like radios, CD players and amplifiers. Surely a CD isn't 'equipment' in the usual sense of the word? For example, if you punch the phrase into the Google search engine you'll come up with a load of companies selling all kinds of, well, audio equipment but not CDs.

Thanks to some preliminary research on the website of the Financial Ombudsman I've discovered that they like insurance companies to be very clear about what they mean. In fact, I was rather reassured to read in one issue of the organisation's Ombudsman News:

When we consider cases we will look first to the common usage meaning of words. Unless insurers bring exceptions clearly to policyholders' attention, they will find it difficult to argue cases which rely on a specific definition which would not be generally recognised by policyholders. Insurers should call a spade a spade.

The general view seems to be that since insurance companies get to write the policies, they also have to take the consequences if the ombudsman concludes that any relevant terms and conditions are ambiguous.

The Financial Ombudsman will deal with most types of complaints about financial products and services particularly those relating to banking, investment and insurance. You have to follow the correct procedures before he'll consider your case which essentially means following through with any complaints procedure offered by the company you've got a problem with.

So that's what I'm going to do. I shall write back to the insurance company – enclosing the cheque, of course, since to cash it would effectively mean I've accepted it as their final settlement. I shall ask them ever so politely to reconsider the amount of money they're proposing to pay and, if they won't, to explain why not.

And if I don't get what I believe I paid for when I bought my insurance policy then I shall be in touch with the Ombudsman. I'm feeling a bit conned and I dislike being conned just as much as the industry does.

More: Insurance Centre | Financial Ombudsman