Can Insurer reduce payout by percentage increase in Premium

[Ajr3773]

Long story short.

 

Involved in 3 car non fault accident on 27th January. (Rear ended at 40mph, catapulted forward into the back of another innocent party.) 

Originally went via a claims management company who had the car independently inspected and deemed it repairable with a 64% repair to value ratio.

£13500 vs £21300 value. 
 

Spoke with my insurer (Covea) who advised under their Internal policy my car would be deemed a write off - did I want to cancel the vehicle claim with the claims management company and pursue the claim through them instead?

 

This I instructed on the 3rd of July and they in turn took over the claim and also had the vehicle moved to their salvage agent.
 

What's transpired this afternoon is that having done a licence check, 2 x SP30's haven't been disclosed to them and their UW's have confirmed that this would of resulted in a 22% increase in premium had they been made aware. (Policy auto-renewed with broker in January).

 

As such they are now saying that when it comes to claims pay-out (non-fault claim, liability from Third party admitted and Police incident log confirms this) they intend to reduce the claims payout by the percentage increase that would of been applied to the premium.

 

In other words I pay £550 per annum + 22% = £121 additional premium. But Covea are saying they will deduct 22% from the total claims payout for non disclosure of these points, resulting in a possible £4,730 reduction from any potential claims settlement. 

 

Is this right, can I challenge this and what is best line of re-course given I was made aware the repair to value ratio would deem the car a write off with them as opposed to being deemed repairable via credit repair?

 

I've no issue at all with a premium increase of £121 being deducted from any potential settlement but almost £5K reduction from the claims payout which i'd of thought they'd be claiming from the third party anyway. 

 

Thanks in advance for anyone's suggestions of how I tackle this moving forward.

[BankFodder]

It sounds extremely unfair to me.

I have to say that you've been here since 2018 so amazed that you went to a claims management company who clearly going to take quite a lot in commission – may be far more than 22% – in fact I'm sure it. It makes me wonder what on earth were doing here on the CAG.

I've still got to work out exactly what you're saying that it sounds very unfair.

Have you thought about pursuing the at fault driver yourself? Do you have all their details?

[Ajr3773]

Yes I’ve got the third parties details and insurer but have never pursued a third party directly before.

Aren’t they just as likely to deem the vehicle repairable given their liability is reduced to £13,5K from £22K if repaired vs write off?
 

That’s my question.

Is it fair?

Is it legal?

 

How do Underwriters make a determination that the annual premium would of been 22% higher at the start of the policy (equivalent to an additional £121) had they been informed of the 2 x SP30’s  

 

but as a consequence of not being informed of these they intend to reduce any potential claims payout by that same percentage increase, resulting in a claims reduction of £4730 when the total claims value will be recovered from the third party. 
 

[BankFodder]

I've already said that I don't think it's fair. And in the insurance business, there are regulations which basically say that if it's not fair then it may not be legal.

I still don't understand why you didn't come here first.

 

What was the value of your vehicle before it was damaged?

 

[Ajr3773]

Pre accident value is £21,270

[BankFodder]

 

Please monitor this thread for a reply tomorrow.

you still haven't told us why you went to a claims management company instead of coming here first.

which claims management company did you use?

are you sure that you haven't signed something that promises them a cut if eventually you make some kind of successful claim?

 

 

Also, why didn't you inform them of your two speeding convictions?

[BankFodder]

Also, what percentage did you contract to pay the claims management company?

[Ajr3773]

Winn Solicitors we’re instructed the evening of the accident. They initially dealt with Credit Hire as well as any personal injury claim with a 25% cut of any potential injury payout but not for any uninsured losses. FYI there is no credit hire now either. 
 

SP30’s weren’t advised to Insurer as policy auto renewed with broker in January and in all honesty I didn’t check the electronic details. Agree no excuse 

[unclebulgaria67]

Never heard of a Car Insurers applying an uninsurance value to a loss.

 

What they are saying, is that you were 22% underinsured, because you had not disclosed the 2 speeding offences. So rather than charge you the 22% premium increase and fully cover the risk, they will simply reduce any potential loss by the 22%.

 

It makes sense economically to the Insurers as 22% of the loss value is much more than 22% extra premium, but I have not heard of this being done on Car Insurance.

 

But if the Insurance policy contract allows this, then you will have to argue about this later with the Insurers.

[Ajr3773]

Correction - Accident was 27th June not January as mentioned in original post.
 

Winn Solicitors we’re instructed the evening of the accident. They initially dealt with Credit Hire as well as any personal injury claim with a 25% cut of any potential injury payout but not for any uninsured losses. FYI there is no credit hire now either. 
 

SP30’s weren’t advised to Insurer as policy auto renewed with broker in January and in all honesty I didn’t check the electronic details. Agree no excuse 

[BankFodder]

Well I'm very relieved that @unclebulgaria67 has never heard it – because I haven't either and I was a bit worried.

It's grossly unfair.  
One thing you should understand is that although your contract of insurance is governed by the terms and conditions, this is all subject to FCA regulations and also legislation which requires that the contract of insurance be fair and that you should be treated fairly. Internal policies and so forth are not relevant to you. If they haven't been disclosed to you in advance then they do not form part of the contract and in any event, just as with the formal contract – they are all subject to requirements of fairness. So don't take the contract as being the final word on the matter.

I see once again that you have avoid answering the question as to why you decided to go to a close management company. Quite extraordinary to give away 25% of what you are entitled to. I wonder if we managed to help you here that you will be giving us a 25% donation   ???  

 

So I'd like to get one or two things sorted out in my mind.

Your vehicle was worth about £21,000 before the accident. The claims management company very helpfully decided that it was repairable – it wouldn't cross my mind that this view was at all influenced by the prospect of 25% of a rather larger pie – perish the thought.

 

The insurer has said that according to their own internal policies, they would have treated the car is a write-off. Of course "internal policies" are a set of secret rules that are intended to operate in their own economic interests at the expense of anybody else. In other words the insurers own self interest dictated that the car be treated as a write-off so that they would then offer you a smaller settlement.

I'm not too clear in my mind as to why they suggested to you that you abandon your original claim which as far as I can see, even with the 25% deduction would have netted you more money then going with the insurer on the basis that the car was written off. Mind you, what was the right of value according to the insurer?

 

Also, what benefit to you did you see in abandoning your original claim to have the vehicle repaired against agreeing with the insurer that it should be treated as a write-off?

I'm also curious to know how you came across this claims management company so quickly after the accident and what prompted you to go with them rather than invoking your insurance?

 

[BankFodder]

Also, have you had a quotation for the cost of repairs?
Do you still have access to the vehicle or has it now been scrapped?

 

[BankFodder]

To follow on from this, there are a number of possibilities which occur to me – but it will depend on the information you give in response to the questions I've put the above.

One is that you can simply challenge the insurance decision by going to the FOS. This would be a very cheap and risk-free option – and could be very useful to get you an initial view – and maybe a complete decision in your favour. Of course it wouldn't be quick. You can reckon on six months at least.

Second option could be to sue the insurer for unfair treatment – but it could be better to wait for an FOS decision first of all.

Third option is that you could simply go after the third party for the entire value of the vehicle. There seem to me to be no need to continue with your insurance company and asking them to settle the claim. It would really be quite absurd for the insurance company to be able to reduce their liability by 22% – yet if you went directly after the third party or their insurers, you would recover 100%.
The only downside here is that you would be claiming for an amount well in excess of the small claims limit and that means that you would risk having to pay quite a lot of costs if you lost the case – and also, because it is beyond the small claims limit, the third party or their insurers would throw money at it simply in order to intimidate you – despite your excellent chances (in my view) of success.

A fourth option which seemed quite attractive to me but we have to discuss it is that you would accept the settlement from your insurer and then go after the third party for the balance. I don't see that accepting a settlement from your insurer at all prevents you from then seeking payment of the uninsured balance from the third party.
Of course this would raise eyebrows and no doubt they would try to call the fact that you hadn't properly updated your insurer into issue – but I don't think that is a matter which should concern them and I don't think it would work. The only people might be interested in that aspect are the police and frankly I don't think there is a remote chance that they would bother at this late stage. Anyway, it seems that the insurer is not withdrawing their insurance, they are simply trying to spin an extra buck out of it.
This would have the advantage of securing the bulk of the payout from your insurer in fairly short order and then the uninsured balance would very likely be less than £10,000 which would be new within the small claims limit and you could then proceed against the third party or their insurer without any particular anxiety as to the consequences if by chance you lost the case (very unlikely in my view).
In fact given a choice between the third party and the third party insurer, I would choose the third party is my target as they are for more likely to be the weaker party, more anxious and therefore more susceptible to pressure. In their turn they will put pressure on their insurer. You effectively bring both of them into conflict with each other and that gives you a stronger hand.

I'm waiting for you to address the questions that I've put earlier on
 

[Ajr3773]

Thanks @BankFodder & @unclebulgaria67 thus far.

 

Let me try and bring some clarity to the questions;

 

Accident 27/06/20 - Significant Rear End Damage and Moderate Front End Damage

Accident Management Company Instructed same evening following advice/referral to use them - Error of judgement, made in haste. We all make mistakes

29/06/20 - Vehicle collected, damage assessment made, hire car supplied, medical and physio appointments organised

01/07/20 - Independent Engineers Assessment concluded - Damage repairable with a repair estimate of between £13460 & £14412 against a pre-accident valuation of £21,270

Report advises that 77 new components are required as part of the repair, most notably a new 'Boot Floor Pan' needs welding into the vehicle and new rear 'Cross Member'.

01/07/20 - Unhappy at the thought of need the vehicle welded I challenge this with the AMC and they advised repair to value ratio has no bearing on their decision to repair. After all the third parties liability in this scenario is £13.5 vs £21K.

01/07/20 - I speak to insurer to ask their opinion. They advise it is their policy to write off anything with a 55 - 60% repair to value ratio as at that marker unknown damage hasn't been accounted for.

03/07/20 - I terminate vehicle claim with ACM and instruct Insurer to take over claim

03/07/20 - I forward copy of AMC's Engineers Report to Insurer for them to review

06/07/20 - Vehicle is collected from AMC's salvage agent and taken to insurers salvage agent 

08/07/20 - Image of vehicle have been passed from new salvage agent to Insurer

08/07/20 - Insurer conducts licence check and determines that non disclosure of points results in being under insured which would of originally resulted in a 22% premium increase had they been aware of the 2 x SP30's

 

You're aware of the story from here. They are basically saying when it comes to pay-out this is likely to be reduced by 22%.

They have the vehicle and I'm currently awaiting confirmation from their Engineers as to whether they also deem the vehicle re-pairable or a total loss given the indication of their internal policy

[BankFodder]

Thank you.

Why is the third party liability only £13500?

 

What has the insurer agreed that the pre-reduction valuation (less 22%) would be?

Also, I now see that you have referred to personal injury. Can you tell us about that and has the value of that been assessed?

[Ajr3773]

Insurer has now sent over a CIA document advising they can deal with this claim on percentage claims basis. 
 

Third party insurer liability if this was being handled by the AMC would of been £13.5k as per the repair estimate given the vehicle was deemed repairable. If it had been written off then the liability would of been the full vehicle value of £21.5k. 
 

My insurer is saying if they deem the vehicle to be a total loss on the basis repair to value ratio is 64% they won’t payout the pre accident value, they will deduct on a percentage claims basis £4730 from £21.5k as I was under insured. 

[BankFodder]

I have to say that I prefer short and concise post – but you seem to write in a kind of shorthand that I'm having difficulty coping with.

Can you tell me what CIA means. Please can you post up the document.

I don't think we need to keep on referring to the assessments of the claims management company. They are out of the equation and I'm not sure that they have done anything to commit you to anything – unless you want to say differently.

Are you saying that the insurance company are offering you £21,500 less £4730? In other words they have agreed the valuation of £21,500?

 

[Ajr3773]

CIA - Consumer Insurance (Disclosure and Representations) Act 2012.

 

http://www.legislation.gov.uk/ukpga/2012/6/pdfs/ukpga_20120006_en.pdf

 

Yes regards valuation - Total Loss value is £21.5K - £4730 on basis of finalising claim on a percentage claims basis. 

[BankFodder]

Thank you. I wasn't aware of this rule at all so that is very useful.

It seems very clear and frankly I suppose that you are lucky that they didn't pull the rug out from under you completely.

Also it seems very lucky that you got clear of the CMC where you would have lost 25% – as I've already indicated, some CMC's have small print which basically says that once they begin a claim – if you abandon it but later run recover a payment, they will still be entitled to their cut.

It seems to me that you don't have much choice other than to accept the offer from the insurer which I calculate is £16,770 – and then proceed to pursue the third party for the uninsured portion.

If you had fully comprehensive insurance then I'm not too sure why your insurer didn't claim off the third party insurer anyway. However, if my calculation is right then that is what you are being offered then rather than get into a dispute with the insurer, you should accept their offer for a quick settlement and then we can help you turn towards a third party.

I asked you questions about personal injury which you referred to originally – but you haven't responded

[Ajr3773]

SCHEDULE 1 Section 4(3).
INSURERS’ REMEDIES FOR QUALIFYING MISREPRESENTATIONS
PART 1
CONTRACTS
General
1 This Part of this Schedule applies in relation to qualifying
misrepresentations made in connection with consumer insurance contracts
(for variations to them, see Part 2).
Deliberate or reckless misrepresentations
2 If a qualifying misrepresentation was deliberate or reckless, the insurer—
(a) may avoid the contract and refuse all claims, and
(b) need not return any of the premiums paid, except to the extent (if
any) that it would be unfair to the consumer to retain them.
Careless misrepresentations—claims
3 If the qualifying misrepresentation was careless, paragraphs 4 to 8 apply in
relation to any claim.
4 The insurer’s remedies are based on what it would have done if the
consumer had complied with the duty set out in section 2(2), and paragraphs
5 to 8 are to be read accordingly.
5 If the insurer would not have entered into the consumer insurance contract
on any terms, the insurer may avoid the contract and refuse all claims, but
must return the premiums paid.
6 If the insurer would have entered into the consumer insurance contract, but
on different terms (excluding terms relating to the premium), the contract is
to be treated as if it had been entered into on those different terms if the
insurer so requires.
7 In addition, if the insurer would have entered into the consumer insurance
contract (whether the terms relating to matters other than the premium
would have been the same or different), but would have charged a higher
premium, the insurer may reduce proportionately the amount to be paid on
a claim.
8 “Reduce proportionately” means that the insurer need pay on the claim only
X% of what it would otherwise have been under an obligation to pay under

the terms of the contract (or, if applicable, under the different terms
provided for by virtue of paragraph 6), where

X = Premium Actually Charged/Higher Premium x 100

 

[Mwynci]

 

9 minutes ago, Ajr3773 said:

SCHEDULE 1 Section 4(3).
INSURERS’ REMEDIES FOR QUALIFYING MISREPRESENTATIONS
PART 1
CONTRACTS
General
1 This Part of this Schedule applies in relation to qualifying
misrepresentations made in connection with consumer insurance contracts
(for variations to them, see Part 2).
Deliberate or reckless misrepresentations
2 If a qualifying misrepresentation was deliberate or reckless, the insurer—
(a) may avoid the contract and refuse all claims, and
(b) need not return any of the premiums paid, except to the extent (if
any) that it would be unfair to the consumer to retain them.
Careless misrepresentations—claims
3 If the qualifying misrepresentation was careless, paragraphs 4 to 8 apply in
relation to any claim.
4 The insurer’s remedies are based on what it would have done if the
consumer had complied with the duty set out in section 2(2), and paragraphs
5 to 8 are to be read accordingly.
5 If the insurer would not have entered into the consumer insurance contract
on any terms, the insurer may avoid the contract and refuse all claims, but
must return the premiums paid.
6 If the insurer would have entered into the consumer insurance contract, but
on different terms (excluding terms relating to the premium), the contract is
to be treated as if it had been entered into on those different terms if the
insurer so requires.
7 In addition, if the insurer would have entered into the consumer insurance
contract (whether the terms relating to matters other than the premium
would have been the same or different), but would have charged a higher
premium, the insurer may reduce proportionately the amount to be paid on
a claim.
8 “Reduce proportionately” means that the insurer need pay on the claim only
X% of what it would otherwise have been under an obligation to pay under

the terms of the contract (or, if applicable, under the different terms
provided for by virtue of paragraph 6), where

X = Premium Actually Charged/Higher Premium x 100

 

 Is this you or the underwriter throwing this in ?

 

This is just taken from the disclosure and representations act, regardless of which is still needs to be contractual in stating the average clause. So if it's in your terms and conditions and has been pointed out at sale (this is not a standard clause within motor insurance) - they've got you, otherwise they needs to back off. 

[BankFodder]

Sorry, could you clarify. Is there some provision that says it has to be expressly referred to in the insurance contract?

If that's what you're saying then please could you link us to the source.

[Ajr3773]

Hi @Mwynci The UW threw this into the mix yesterday. 

 

As @BankFodder mentions above they are making a meal of this, given they will be claiming back from the third parties insurer anyway given its a Fully Comprehensive Insurance. 

That said they have advised this morning that they need to prove to the TPI that I've been fully indemnified and this plays heavily on the basis I've made a 'careless misrepresentation'. My view is its an oversight on the basis the contract was auto re-newed. 

 

As stated, non fault accident, full liability accepted by third party and police log confirms this, following attendance at the scene so no dispute. Surely my insurer has no liability. 

[BankFodder]

I'm going to say once again I think that you are fortunate that they didn't refuse to cover you at all. Normally insurers are looking for a way out and I think they could have been much more heavy-handed with you.

I would advise you to take the money and then if you want to pursue the third party will help you.

The great thing is that if you take the money from the insurer then you are left with a relatively small sum which doesn't put you at risk if you decide to bring a small claim – and if liability has been fully admitted then I don't really see that you can lose.
I'm sure that the other side will bring the reduction of your insurance cover into issue – but I don't see that it is relevant to the question of their liability.

Otherwise you're going to get into very complicated ground about the assessment of your failure to keep the insurer informed about your speeding convictions. I'm sorry to say but I think that it is absolutely clear that these things have to be mentioned to an insurer and it is absolutely clear that the insurer would have charged you a greater premium – or even possibly have refused to insure you. Do you have any other convictions which the insurer has been made aware of? Or did you have a completely clean licence before these two speeding offences

[Ajr3773]

2 minutes ago, BankFodder said:

I'm going to say once again I think that you are fortunate that they didn't refuse to cover you at all. Normally insurers are looking for a way out and I think they could have been much more heavy-handed with you.

I would advise you to take the money and then if you want to pursue the third party will help you.

The great thing is that if you take the money from the insurer then you are left with a relatively small sum which doesn't put you at risk if you decide to bring a small claim – and if liability has been fully admitted then I don't really see that you can lose.
I'm sure that the other side will bring the reduction of your insurance cover into issue – but I don't see that it is relevant to the question of their liability.

Otherwise you're going to get into very complicated ground about the assessment of your failure to keep the insurer informed about your speeding convictions. I'm sorry to say but I think that it is absolutely clear that these things have to be mentioned to an insurer and it is absolutely clear that the insurer would have charged you a greater premium – or even possibly have refused to insure you. Do you have any other convictions which the insurer has been made aware of? Or did you have a completely clean licence before these two speeding offences

As  @Mwynci states this can't be enforced if not in the terms of the Motor Insurance or pointed out at Point of Sale. Again referred to as not a standard motor insurance term. 

They also can't retrospectively opt not to cover me. I'm not going to roll over and just accept almost a £5K reduction for something they have no liability on. The other note of interest is the word 'Proportionate' Is £5K Proportionate to £120?