Tuesday 15 October 2019

Insurers 'voiding' policies and then failing to pay out, watchdog warns

Ombudsman: Ger Deering has criticised some insurers. Photo: Patrick Browne
Ombudsman: Ger Deering has criticised some insurers. Photo: Patrick Browne
Charlie Weston

Charlie Weston

Insurance companies have been criticised by the Financial Services Ombudsman for cancelling policies and then refusing pay outs.

Ombudsman Ger Deering said this "voiding" of policies often happened in an unfair and disproportionate manner.

He said some insurers maintained there had been a non-disclosure when the policy was taken out and then refused to make a payment when a claim was lodged.

This typically happens where a consumer fails to disclose they had a previous claim in the case of home or motor cover, or a pre-existing illness in the case of life policies.

Mr Deering used his statutory powers and mediation processes to overturn a number of pay-out refusals last year.

A report from Mr Deering for last year shows an unnamed insurer agreed to make a payment of €223,463 in relation to a claim under a serious illness policy which had initially been rejected.

Mr Deering got agreement from an insurer where it paid €122,500 to a family whose claim in relation to their father's whole-of-life policy had been rejected.

And a payment of €40,000 was agreed for a couple whose storm damage insurance claim had initially been rejected.

He condemned the move by insurance companies to void policies in a manner which he considered to be "unreasonable and disproportionate".

"Where a person has an insurance policy cancelled by an insurance company due to alleged non-disclosure, or for whatever reason, this can have serious implications and render it very difficult, and in some instances almost impossible, for that person to get any sort of insurance cover subsequently," Mr Deering said.

The voiding of an insurance policy is something that should not be done lightly.

"To avoid the risk of non-disclosure and the potential voiding of policies, I hold the view that insurance companies and insurance intermediaries should ask questions prior to the inception of a policy in a clear manner and ensure that customers are clear on what they are being asked and the potential consequences of answering incorrectly," he stressed.

The ombudsman said Irish Life Assurance generated the most complaints about financial services company last year. There were a total of 19 complaints about Irish Life Assurance, six of which were fully upheld.

It was followed by Irish Life Health with seven complaints, and Permanent TSB on six complaints.

Both Irish Life Assurance and Irish Life Health are owned by the Great West LifeCo Group.

In an overview of the operation of the service for the last year, Mr Deering said he received 5,588 complaints in total for 2018, with more than half relating to banking.

Almost a third of all complaints received involved mortgages.

These concerned poor customer service, maladministration and issues around the interest rates to be applied on trackers.

Mr Deering said there were some 1,200 tracker cases in his office. There were on hold pending the banks carrying out an industry-wide probe. But the ombudsman said half of the tracker complaints lodged with his office were now active.

They include cases were people got compensation but were disputing the amount. Other cases involved people put back on a tracker they argue is the wrong tracker margin.

Irish Independent

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