Why do insurance companies ask so many questions?
And why is it important that your client’s application information is accurate?
So firstly I suppose I should explain the reasoning behind the questions – why we need so much detail when arranging to place cover. The easiest explanation is that it’s simply a fact-finding exercise for us. When you are approached by a new client, you need to ascertain key information to make an informed decision of the best way to assist them. This may be gained over multiple conversations in person, by phone, or via email.
We don’t have that luxury as we need to capture all the information to make an informed decision on whether we can offer cover or not. And if we can offer cover, we also need to determine what terms and also what price we need to charge. This way, if the worst was to happen, we can help to put your client back into the same position they were before the unexpected incident occurred that caused their loss.
It’s normally at the point of a loss that errors/mistakes come to light which can have a significant impact on the outcome of the claim. This could result in the claim being paid out at a reduced level, or in some cases it could mean that the claim is not paid out at all as the policy is classed as void. Read more about when insurers could void polices for non-disclosure here.
How inaccurate information can impact a claim
As a result of misinformation, handling of the claim is likely to be delayed as we will need to look to ascertain if the non-disclosure/misrepresentation of facts was accidental or deliberate, or as a result of having not taken reasonable care. This may well result in the voidance of the policy. (We will also refer to CIDRA (the consumer insurance discloser and representation Act 2012) when deciding next steps.)
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Having discussed the impact of misinformation, it is worth noting that insurance companies look at voidance as a last resort and explore other avenues to ensure customers are being treated fairly.
If we were presented with all the information at the point of placing cover we may have made a different decision as to how, or what terms we would have applied, if any additional premium would have been due. Or we would deem the risk as unacceptable to us to the point that we would not have provided cover had we known the full facts.
You can learn more about perils of misrepresentation and the complaints that arise from people who have not taken out sufficient cover which lead to underinsurance, and read more here on how to handle customer complaints over misrepresentation.
Other factors may also be taken into consideration depending on what the claim is for and if the error/mistake affects the circumstance of the claim. For example, if theft has occurred at the property and you failed to disclose that the property is situated within 1.5 miles of a watercourse, this should not affect the validity of the claim. However, depending on what difference this would have made had the information been provided at the point of presenting the risk, it could impact the next steps, as the insurer may have only accepted the risk but applied additional premium and terms.
Premium average and the underinsured percentage principle
Premium average could be applied meaning, the amount paid would reduce in line with the percentage of additional premium. An example of this would be if a consumer had only paid £75 a month for their premiums, but they would have been paying £100 a month were the issue disclosed, the insurer would be entitled to pay only 75% of the claim. Some insurers may decide to offer their customers the option of paying the additional premium to continue the cover, but the customer would need to understand that this isn’t something they have to accept if they don’t want to – instead, the usual remedies under CIDRA will apply.
Alternatively, the claim could be calculated using the underinsured percentage principle. In this example you could be underinsured by 50% but perhaps only 25% under premium average, as it would depend on the circumstances of the error as multiple factors are taken into consideration. So, in summary, inaccurate information at the point of cover could lead to a less than satisfactory payment if a claim is made.
Further to this, if the true facts of the property had been disclosed which would have resulted in no cover being offered in the first place, then the cover and claim could be deemed void altogether.
To understand the risks of underinsurance, and how to mitigate this, please also see our previous Lawskills article.
So what can I do to protect you and your client?
In a nutshell, it’s a bit of a minefield and one to avoid entering if you can! So try to gather as much information as possible and ensure that you are providing accurate information at the point of quote and inception and also the point of renewal. (Don’t just take it that the information was correctly provided in the first instance by another person, and their circumstances may have changed since.) If you are made aware of an error, contact the provider of the cover and discuss.
How we can help you reduce this risk by simplifying the quote process
It’s not all bad news though. Here at Vasek Insurance, we can help reduce the exposure to the risk for you and your firm. We only ask you to confirm four quick questions – your client’s address, the number of bedrooms, type of property, and approximate year of construction.
So not only have we greatly reduced the amount of information required to obtain a quote, but we also offer a Guarantee of Insurance* which helps protect you even further as mistakes/errors do occur (unless they are deliberate or reckless).
At Vasek Insurance, we aim to help our customers find suitable cover for their property’s needs. Our Unoccupied Direct Property Insurance for homes that are empty due to probate or the owner moving into care provides £1 million buildings cover as standard when the property has no more than 7 bedrooms. As such, we do not need to know the rebuild cost, to help provide a quick and simple process for professionals such as executors or solicitors acting on the homeowner’s behalf when searching for empty home insurance.
Our product also provides £10,000 contents cover and the option to increase the sum insured if required. Cover is subject to the full terms and conditions of our policy wording, which can be read on our website.
We have tried to make our terms and conditions as client-friendly as possible, and I am happy to go through them with you to ensure you and your clients are in an optimal place should you need to call on the cover.
If you would like to discuss our product further or get a quote, call me on 07833446070 or email firstname.lastname@example.org.
*We guarantee that any information provided to us by you or anyone acting on your behalf such as, but not limited to, an executor, solicitor or holder of a power of attorney WILL NOT affect this insurance or any claim that may be made. Therefore if there is any loss or damage at the residential premises shown in the schedule, which is covered by this insurance we guarantee to deal with the resultant claim in line with the terms of this insurance policy without exception.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Vasek Insurance accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
Vasek Insurance is a trading name of Arthur J. Gallagher Insurance Brokers Limited, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909.
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