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http://www.financial-ombudsman.org.uk/publications/ombudsman-news/144/144.html

 

144/3 – Mr A complains that his home insurance is too expensive

Mr A, in his eighties, had been living with dementia for a few years. He didn’t use a computer, and his wife, who’d always taken care of the home expenses, had died about seven years before. So after this he’d asked the insurer to send things to him by post.

 

Mr A’s nephew got in touch with us when helping his uncle out with his household finances. He’d noticed the home insurance for his uncle’s two-bedroom terraced home was £1,400. He’d found similar policies online for as little as £150. Indeed his existing insurer was quoting £300 for more comprehensive cover.

 

He’d been with the same insurer for 15 years, originally taking out the policy for £200. The policy had automatically renewed every year and Mr A had never made a claim. Mr A’s nephew complained on his uncle’s behalf that the price of the policy wasn’t fair. He told us his uncle was very upset to think his insurer had taken advantage of his loyalty.

 

In response to Mr A’s complaint, the insurer said the price was correct and that the quotes on their website were lower because of “online discounts”. Mr A’s nephew asked for our help to sort things out.

how we helped

When considering whether Mr A was treated fairly, we looked at whether he’d been given clear information when his insurance was due to be renewed. He needed to have been able to make an informed decision about accepting the price and cover offered.

 

Mr A’s renewal documents were sent to him by post. And for the first four years the price had increased very little. In the fifth year, it went up by 15% and by similar amounts after that.

 

The insurer’s renewal letters told Mr A that as a valued customer he’d received a number of discounts for making no claims and staying with them. But we thought the difference in price between Mr A’s policy and the online policies couldn’t be explained by the online discounts alone. The renewal letters also referred to other policies being available, but said that unless his circumstances had changed, Mr A didn’t need to do anything. Overall, we thought that the information he’d had at renewal could have been misleading.

 

From what Mr A’s nephew told us about his personal circumstances and his lack of direct engagement, we thought it should have been clear to the insurer that Mr A might need additional help in making an informed choice about whether to renew his policy.

 

We didn’t think the insurer had done enough to let him know there were other, potentially cheaper, options available. Increasing his price each year without taking into account Mr A’s needs had left him potentially susceptible to detriment. We thought that his vulnerability should have been apparent from the fifth policy year onwards. That was also when the price of his policy had begun to increase significantly, the original new customer discount having been recouped by then too.

 

We told the insurer to refund the difference in premiums, with interest, for each year between the price paid after five years and the subsequent renewal offers. The insurer also accepted our recommendation to pay £150 for the upset they caused Mr A.

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