If your business has suffered a loss, insurance ought to help lift the burden. So it can be very frustrating if your insurer decides to reject your claim, or only cover part of the amount you're seeking
You don't always have to accept the insurer's decision if you think they've got it wrong.
Why was my insurance claim rejected?
If your insurer rejects your claim, they'll tell you why. Typical reasons include:
- providing incorrect information when you applied for, or renewed, the policy;
- not updating your insurance details when your circumstances changed;
- failure to comply with policy terms - for example, not having secured your premises properly;
- the cause of loss being excluded - for example, if equipment breakdown was caused by wear and tear rather than accidental damage.
In other cases, the insurer might only offer to pay part of the amount you are claiming. For example, if the insurer thinks your insurance didn't cover the full value of your business equipment, they might reduce any payment by an equivalent percentage.
If you're clearly in the wrong, you may have no choice but to accept the decision. But if you think they've got it wrong or are being unreasonable, you should complain. For example, you may have grounds to complain if:
- the insurer claims that you didn't give them all the information you should have - but you answered all the questions in the application form honestly;
- the insurer is relying on obscure wording in the policy that you weren't aware of;
- you took advice from an insurance broker and bought a policy that they said would cover you.
If you think they were wrong to reject your claim, check through the paperwork. What do the summary of cover, and the detailed insurance policy, actually say? Do you have copies of any application forms and letters you've sent?
For larger and more complex claims, you may want to consider paying a loss assessor to act for you.
Making a complaint to an insurer
If you bought the insurance policy through a broker, you should contact them first. They may be able to help you resolve the problem. Make sure that you keep records of any conversations you have with your broker or insurer.
Your next step is to make a formal, written complaint. Your broker or insurer will publish details of who to write to on their website, or you can contact them to ask where to send your complaint.
Make it clear that you're sending a complaint and include the policy number. Explain why you think they've got it wrong. Say what you want them to do. And let them know what your next steps will be if you don't get a satisfactory response.
Insurance companies typically aim to respond to complaints within four weeks. Once you've had a final response, or after eight weeks, if you're still unhappy you may be able to take your complaint to the free Financial Ombudsman Service.
The Financial Ombudsman Service
Only individual consumers and smaller businesses can complain to the Financial Ombudsman. Your turnover must be no more than €2 million, and you must have fewer than ten employees.
You must have already gone through the insurance company's complaints procedure.
The Financial Ombudsman aims to help you reach a fair and reasonable outcome. How they treat your complaint may depend on how ‘sophisticated' they think you are.
- If you are a very small business - for example, with turnover of £50,000 and no employees - you are likely to be considered ‘unsophisticated'. They will treat you like an individual consumer.
- Larger businesses, with higher turnover, more experience of insurance and perhaps legal advisers, are considered sophisticated. You're more likely to be expected to disclose all ‘material' information when you apply for insurance, and to understand and comply with the detailed terms.
The Financial Ombudsman can only award compensation up to £150,000. But if the Ombudsman rules in your favour, an insurer might decide to pay the full amount even if it's higher than this limit.
If you cannot use the Financial Ombudsman service, or if you're unhappy with their decision, you can choose to take legal action.