More than one in five home insurance claims are rejected, data from the Association of British Insurers (ABI) shows.
One of the main reasons for an unsuccessful claim is the complexity of policies. Policyholders often fail to receive a payout, as they are confused about what is covered.
The ABI reports that wear and tear and damage caused by a lack of maintenance in homes are also key reasons for claims being rejected.
Contrastingly, 99% of motor insurance claims result in a payout.
The ABI has published the figures for the first time. The data covers claims made during 2013 and 2014.
The success rate figures are based on 6.9m claims approved by 19 insurers, including 4.3m motor insurance claims, 1.8m home insurance claims and 800,000 travel insurance claims.
The study found that 79% of home insurance claims are successful, resulting in an average payout of £2,520.
Of the policyholders whose claims were rejected, some made claims that were valued below the policy excess and others had bought the wrong type of cover. Many home insurance policies have add-ons that cover certain eventualities, which increase complexity to renewals.
Many claimants were turned down due to a failure to maintain their property. For example, roof damage caused by a storm that affects many homes in an area is likely to be successful. If roof damage is caused by previous faults that have been left, the policyholder is less likely to succeed, says the ABI.
A spokesperson for the ABI states that policies are designed to cover “sudden, unexpected and accidental”1 events.
Travel insurance claims had a success rate of 87%, according to the statistics, with a typical payout of £884.
Reasons for rejection include failure to declare a pre-existing medical condition and failure to prove that belongings have been lost.
Almost all (99%) of motor insurance claims were successful, with an average payout of £2,160. However, cases and policies are often simpler.
The Director General of the ABI, Huw Evans, says the data was released in order to gain trust from consumers.
“Contrary to popular belief, insurers want to pay honest claims,” he insists. “It helps nobody when customers have bought the wrong product or have not disclosed important information.”
He continues: “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.”1
The ABI urges customers to take time reading the terms and conditions when buying or renewing home insurance, ensuring they know exactly what is covered.
Unresolved disputes between insurers and policyholders often go to the Financial Ombudsman Service.
The Financial Ombudsman Service reports that there were 5,504 inquiries relating to buildings insurance from customers between April and December last year. Around 38% of cases were upheld in the customers’ favour.
There was an astonishing 178,715 enquiries about payment protection insurance (PPI) received over the same period. About 70% of cases were upheld in the customers favour.