1 in 5 home insurance claims rejected – says ABI

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By Bob Atoo
February 15, 2016

Related: 2 in 5 car and home insurance policyholders not happy with claims processes

The complexities of home insurance policies are being blamed in part for a figure purported to be in excess of 1 in 5 claims being rejected by insurers according to new research.

This damning indictment on the public’s approach to home insurance policy features and exclusions has been laid bare by new research from the ABI, who point specifically at confusion regarding exactly what is covered by home insurance plans.

One of the most common issues to spark rejected home insurance claims was apparently the wear and tear of homes, and damage caused by lack of maintenance carried out by the home owner.

After scrutinising home insurance claims filed between 2013 and 2014, the Association of British Insurers (ABI) has made their findings public for the first time.

The data analysed by the ABI focused on the outcomes of 6.9 million claims received and handled by some 19 individual home insurance providers, and was spread between (1.8 million) home, (4.3 million) motor and (800,000) travel policies.

Wrong cover types and add-on complexities contributed to low home insurance claim success rates

Addressing the success rates across the board, and despite just 1 in 5 home policy claims bearing financial fruits amid those seeking financial recovery, conversely 99% of motor insurance claims ultimately paid-out (£2,160 deemed the average). The ABI reasoning that car insurance policies – from its observational perspective – seemed more straightforward and therefore less open to any confusion or misunderstanding on the part of the policyholder.

Elsewhere and those pursuing travel insurance claims during the period in question enjoyed an overall success rate of 87%, with typical financial reimbursements said to be in the region of £884.

Of the 79% of home insurance policyholders whose claim ended in success, the findings of the ABI’s study highlighted that £2,520 represented the average payout amount.

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With regards to travel policy claims being turned down, explanations behind these decisions included policyholders neglecting to declare pre-existing medical conditions and inability to prove belongings were lost.

Looking a little closer at the underlying reasons why home insurance claims were dismissed by providers and the ABI discovered that a percentage of claims were valued below the policy excess, while others had effectively purchased the wrong type of cover for their particular needs. It also flagged up a plethora of add-on features aimed at expanding existing policies to cover more detailed eventualities, yet which introduced more complexity when it came to renewal time.

In terms of policyholders being caught out by failing to maintain their properties (and thus handing home insurers a ‘get out of jail free card’), roof damage which might have been exacerbated in its severity by pre-storm faults which had been overlooked by the owner/policyholder would not impress insurance providers and more often than not lead to claim rejections.

For its part the ABI stressed that home insurance policyholders’ paid attention to terms and conditions when either buying or renewing policies, with its Director General, Huw Evans going as far as to say; “Contrary to popular belief, insurers want to pay honest claims. It helps nobody when customers have bought the wrong product or have not disclosed important information.” Evans went on to add; “So we will use the analysis we are publishing today to drive awareness campaigns to improve even further the acceptance rates for home and travel. Buying insurance should never just be about getting the cheapest price in the quickest time possible, it should be about ensuring you have the right product for your hour of need.”