Home insurers reject almost HALF of all claims

Some insurers reject nearly half of all home insurance claims, according to official figures, with an average of one in four being rejected.

While insurers argue the true figure is lower, consumer advocates say the numbers reveal a second major problem: customers don’t understand what they’re being sold.

Home insurance is designed to protect the most valuable things we own: our property and possessions. This insurance consists of two parts. First, there’s building coverage, which pays out if a physical property is damaged, and second, home contents insurance, which covers the items inside.

Yet many major insurance companies, including some of the top ten insurers, are rejecting nearly half of all claims, according to the latest alarming figures from regulator the Financial Conduct Authority.

These statistics show that an average of 23 percent of home insurance claims are rejected by insurers — with some companies refusing to pay out as much as 45 percent.

In contrast, according to figures from the FCA, about 99 percent of auto insurance claims are accepted by insurers.

>> Are your auto and home insurance bills about to skyrocket by 30%?

There is also a huge variation between insurers when it comes to paying home insurance claims.

Some companies, such as Ageas Insurance, QIC Europe and Qmetric, pay 55 to 60 percent of these claims, according to FCA data. But others, such as Haven Insurance and Hiscox, pay out almost 100 percent.

Why are so many home contents insurance claims rejected?

Insurers say that 23 percent of home insurance claims being denied is more complicated than it first appears.

Part of that figure comes from real claims being rejected — but insurers also blame bureaucratic red tape for some home insurance rejection statistics.

These figures include customers who contact their insurer to ask whether something is covered by their insurance, but ultimately do not submit a claim.

That scenario is known in the insurance world as a ‘claims walkout’.

Do customers understand home insurance?

Even if abandoned claims make up a large portion of rejected claims at some companies, it goes unaccounted for why some insurers seem to be rejecting almost half while others are rejecting almost none.

It also doesn’t explain why insurers’ own numbers show the same problem that the FCA has highlighted.

The Association of British Insurers industry association reports separately that 19 per cent of home insurance claims were rejected in 2018/19 – almost the same as the FCA’s 23 per cent figure.

Either way, insurance experts say claims runaways are a sign of a second major problem in the insurance world — that customers are often unsure of what they’re buying.

The whole point of the claims drop is that a customer should have contacted an insurer to see if they are covered for anything – but they should have known in the first place.

Experts say there is widespread lack of consumer knowledge about insurance contracts, which could be 16 times longer than War and Peace

James Daley, of campaign group Fairer Finance, said: ‘I think customers don’t understand what they are buying. This is a recurring problem with home insurance policies, which can have up to 20,000 pages in a policy sheet.”

That’s about 16 times longer than the epic novel War and Peace, often used to describe something by, which is about 1200 pages.

Michael Sicsic, managing partner of Sicsic Advisory and former head of insurance at FCA, said: “It’s either a reflection of the product not meeting customer expectations or customers not fully understanding their coverage.”

But he added that “the business model of insurers is to pay claims, not find reasons to deny them.”

What insurers say

Insurers point the finger at each other and say that some companies simply report more outages than others.

A spokesperson for AA Underwriting said: ‘The AA Underwriting Insurance Company will always accept and pay claims where the customer is covered, and our underwriting levels match those of larger home insurers.

“We believe that these figures do not provide a meaningful comparison for claims acceptance for several reasons, but primarily because insurers seem to interpret the FCA claims acceptance definitions differently.”

An Ageas spokesperson said the data includes “all calls, even if a customer has contacted us to check they have coverage, or mistakenly called to discuss a policy they have with another insurer”.

The spokesperson added, “While this means our claims acceptance rates appear to be low, we are pleased to see our complaint rate is on the lower side compared to the market.”

A spokesman for Lloyds Bank said: ‘Around 10 per cent of our home insurance customers’ claims in the second half of 2021 were rejected.

“However, the FCA data also includes things like a customer who called us to ask if something was covered by their insurance – such as a TV that stopped working – and was told it wasn’t, even if they had no claim. had submitted. We are confident that our products will serve our customers.”

A Qmetric spokesperson said, “We pride ourselves on the customer-centric service we provide and carefully monitor satisfaction and renewal rates, both of which compare well with industry averages, and respond to feedback to continually improve the customer experience.”