New law makes it harder for insurers to turn down claims
Insurers will no longer be able to reject claims when customers innocently fail to declare information, thanks to a new law that comes into force tomorrow.
As it stands, the onus is on the customer to tell insurers relevant information to make sure any future claims will be valid. But insurers can later block payouts if they discover you might not have declared something significant relating to your insurance.
The Financial Ombudsman says this is most common in life and critical illness cover but also occurs in motor and household insurance.
The new law will shift the onus onto the insurer to ask clear questions about the information they require – and it means insurers will still have to payout if a customers fails to mention something the insurers later feels is relevant, for example, a previous illness.
However, claims can still be blocked when information is deliberately withheld.
The law is designed to protect customers who find themselves caught in a trap when unsure about exactly what information insurers require.
A spokesman for the Association of British Insurers said: "We want customers to take out insurance policies with the confidence they are covered. By placing a legal duty on insurers to ask customers all relevant questions at point of sale, people will know exactly what they need to disclose upfront.
"This Act reflects steps taken by the industry over the years to improve customer awareness of what they need to tell their insurer."
But health insurance expert Kevin Carr said change was already underway: "Any moves to improve consumer understanding are to be welcomed, although the reality is that not much will change and that's because the insurance industry and the Ombudsman had already been working this way.
"The change is more about bringing the law into line with what the Ombudsman had already been providing guidance on for many years. We might see the wording of some application forms and questions change a little, and the issue of non-disclosure should be clearer than ever, but overall I wouldn't expect too much impact."
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Association of British Insurers
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.