Insurance firms rebuked by watchdog for ‘unreasonable’ refusal to pay out claims

Insurance companies are being “unreasonable and disproportionate” by cancelling policies and not paying out when customers make a claim, the financial services watchdog has said in a stinging rebuke of the industry.

People are being left in "almost impossible" situations trying to get cover elsewhere as a result of their insurer "voiding" policies because they say the customer failed to disclose something when applying, says Financial Services and Pensions Ombudsman Ger Deering.

One example includes a couple whose home was significantly damaged in a storm, but who were refused an insurance pay-out because they “ought to have known” an extension built before they moved in included “non-compliant materials”. The insurer later agreed to pay them €40,000.

In another case, a woman was refused a pay-out on her €8,000 van being stolen and burnt out because the vehicle was registered in the name of her brother, from whom she had bought it. The insurer later reversed its decision and upgraded her policy.

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They were among a number of cases where Mr Deering has intervened to overturn or mediate a resolution when insurers refused to pay out. Publishing a report of complaints made to his office last year, he criticised the unnamed insurance companies involved.

“I regret to say . . . that some insurance companies continue to void policies in a manner which I consider to be unreasonable and disproportionate,” he said.

“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.

“I firmly believe the voiding of an insurance policy is something that should not be done lightly.”

Mr Deering suggested the onus is on insurance companies to ask questions “in a clear manner” before a policy is taken out to ensure “non-disclosure” issues do not arise later.