contents insurance - under valued items taken in burglary - help

[unclebulgaria67]

Pretty common knowledge that Gold prices have increased quite a lot since the banking crash. For the friend not to be aware of this, they must have been hiding in a hole, so I don't recommend using that as an argument, as it won't be believed.

 

All your friend needs to do is write saying that he had not got around to having new valuations done since 2008 and was happy to Insure on the basis of the 2008 valuations. Perhaps your friend could say that they were anxious about taking jewellery out of the house to have them revalued again.

 

It is worth searching the FOS site for information. e.g

 

http://www.financial-ombudsman.org.uk/publications/technical_notes/under-insurance-household.html

 

The Insurers may pay up to the value held on the policy, but they could make a deduction based on being under insured. When your friend took out the policy they inadvertently misrpresented the risk to the Insurers. It is possible that had the Insurers been aware that the jewellery was valued at £18k, that they would have required additional security measures to be taken. The additional security measures may have arguable prevented the burglary.

 

So this may be tricky and I can't give a definite response as what will happen. Hopefully the Insurers will deal with it in a commonsense way and not look to be too harsh on your friend. If your friend has any problem, he should make a complaint to the Insurers and if necessary follow it up with the FOS.

[unclebulgaria67]

Nothing to add to what was said earlier. See what the Insurers do in response to the letter sent.

 

Personally I don't buy the ignorance answer. It is obviously a hindsight reaction, because nobody expects to be burgled and caught out being under-insured. I think it is more believeable to say that the jewellery was insured for £10k based on valuations from 2008, which were correct at the time.

[unclebulgaria67]

Hello Mwynci and thank you for the reply, as well as UB67. Forgive me if I'm wrong, I'm not sure if anyone has explained how averageing works on this thread. Is there any chance someone can explain more than I remember from the insurance exams a long time ago please?

 

HB

 

They can look at how much under-insurance has occured and then deduct that percentage from the claim. But it is not as straightforward as that. There will be a limit for valuables under the policy. Also the Insured may have provided valuations to the Insurers which confirmed the value at £10k. If the Insured provided valuations to the Insurers, then actually the question could be asked, as to why the Insurers did not apply the correct price increases and not just normal index-linking.

 

I have seen many cases where the Insurers have paid out what the Insured has covered their valuables for and not look to apply a reduction to the amount, because valuations were out of date.

 

Hence this is why the letter sent by the OP's manager was the wrong way to react. The Insurers will have thousands of customers with jewellery specified on their policies, for which the valuations are out of the date. While it is the Insureds responsibility to ensure that they increase the cover for their valuables, you would question as to what the Insurers did to communicate to their policyholders about the increase in precious metal prices.

 

I believe the FOS have ruled in cases similar to this, that the Insurers should pay out what the Insured has specified on the policy and not look to apply a reduction based on under-insurance. This is due to the rapid rise in precious metal prices, where the valuations are less than 6 years old. We are an exceptional times, following the banking crisis.

 

On a different note, I suspect that the Insurers will want to investigate this claim as fully as possible. Given that the jewellery was 22ct, I am suspecting that this is Indian gold and I do seem to remember that at this time of year there have been a spate of such burglaries before, in the run up to Diwali, which is this Sunday. The Insurers may be more interested in the risk issues, than whether they will apply an under-insurance deduction.

[unclebulgaria67]

index linking is where the Insurers increase the sums insured by the percentage published by government statistics. It relates to consumer durables, which are the standard items in peoples homes and not really jewellery.

 

There is no template letter. I would suggest your boss keeps the letter staightforward. That the Insurance values for the jewellery were based on 2008 prices and that he was not aware that the Insurance policy contained any terms that required a re-valuation every few years.

 

He should not state that he was not aware gold prices had increased, as that would be silly. Most people are aware that gold has increased in price.

[unclebulgaria67]

Seems ok to me.

 

The valuation was only 5 years old, so it is only because of the banking crash and rush to buy gold that has caused the sharp increase in values.

 

This is a reminder to people reading this thread. If you have gold/silver or other precious items that have gone up in value in recent times, you should seek new valuations.

 

Probably a new valuation at least every 3 years would be about right. But when you get valuations, find out the approx weights in ounces, so you can check yourself whether prices have increased and Insurance values needs to be increased.