THE COUNTRY’S financial services watchdog has said he is concerned about a practice by insurance companies of cancelling policies because of minor non-disclosures by the customer.
In an interview with TheJournal.ie, Financial Services Ombudsman Ger Deering said some companies are asking “vague questions” and leaving it to the consumer to decide whether something is a material issue.
“What can often happen is somebody answers a question incorrectly and two years or three years later they have a claim. Now, not alone is the claim denied, and there might be some merit in doing that, but often then the insurance company actually cancels the policy,” he explained.
“That has a profound impact because if you’ve had an insurance policy cancelled, say house insurance, it’s very unlikely you’ll get it from anybody else. In my view that action seems disproportionate in some instances.”
Of the 4,513 complaints received by the ombudsman’s office last year, 43%, or 1,866, related to insurance. There were 229 complaints about life insurance last year, 205 relating to medical expenses and 137 about travel insurance. There were also 133 complaints about household insurance.
So far this year, there have been 1,362 complaints relating to insurance.
Critically important information
Deering gave an example of one complaint his office dealt with. The customer had been asked when they took out their policy if they had a flat roof. When they answered ‘yes’, they were asked what percentage of the roof was flat and they gave an approximate answer.
“I listened to the call – part of dealing with complaints here is we listen to the calls in evidence afterwards and they can be very useful because you get a very clear insight into what actually happened at the time,” he said.
The customer held the policy for a couple of years and then made a claim. When the assessor came out, they found a higher percentage of the roof was flat, and the company did not usually insure roofs of that percentage. In this instance, not only was the claim dismissed, but the person’s policy was cancelled.
I upheld that complaint and told them to reinstate the policy and I also told them to admit the claim. Because I took the view that if the answer to that question was so critically important, then they shouldn’t have accepted ‘oh it’s approximately, let’s say 40%’. They should have said ‘ok this is very important, therefore, can you go and find out what the exact percentage of the roof is?’.
“You’ll often be asked if you are within 200 metres of a water source – do people know?” Deering said.
“So I would like to see insurance companies explain this is more detail.”
He said these issues usually tend to arise when a customer has made a claim and can be years after they first took out their policy.
A lack of clarity
Another complaint the ombudsman dealt with involved a question on a form which stated: ‘You or anybody else in the house have not had a claim in the last five years.’
“Why would you ask a question in the negative? I’m guessing the question they were asking was ‘ have you had a claim in the last five years?’. So, why not ask that, rather than state you have not had a claim? Because in answering that question, you don’t know whether they’ve answered yes or no,” he said. In this case, again the policy was cancelled.
The Financial Services Ombudsman upheld the complaint, directed that the policy be reinstated and that the claim be paid. Deering also directed €3,000 in compensation.
I can direct compensation of up to €250,000, but I can also direct rectification. And sometimes the rectification is more important than the compensation because actually if your house is burned down, then having the claim admitted, or if it’s a whole of life policy, something like that can be more important.
Travel insurance is another area of concern for Deering as he said companies are not always clear enough about what they mean when they ask about pre-existing conditions.
“In fact, what a pre-existing condition might mean for some policies is if I went off to a consultant this morning, had some tests done, the consultant comes back and tells me ‘you’re grand, there’s nothing’,” he explained.
“Next year I’m taking out a policy which asks ‘Do you have any pre-existing conditions?’. The question actually – the subquestion of that – might be ‘have you had any tests?, examinations or anything done?’. The person probably says ‘no’ – they might even have forgotten they went to the consultant.
I would say that consumers need to be very careful about the kind of questions they’re being asked and answer them correctly and providers need to ask the questions in a clear manner that is understandable.”
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