Can Insurer reduce payout by percentage increase in Premium

[BankFodder]

As far as I can see, schedule the schedule refers to a reduction in the same proportion – and that means a percentage.

I'm still waiting to know the source of the information which says that the effects of the Act must be included in the insurance contract.

[MH1927]

FOS have rulings agreeing to this such as 

 

DRN0300892

DRN7191130 

DRN2406526

 

Its legislation and law of the land it does not expressly need to be written into a contract for it to be binding, think of the Cunsumer Rights Act you are covered by it regardless.

 

The proportionate element refers to a percentage and is covered in the Decisions above. They take the percentage of the cost of the policy and apply it to the benefit. The FOS agree with this process and can be seen in the decision

[BankFodder]

Just now, MH1927 said:

 

Its legislation and law of the land it does not expressly need to be written into a contract for it to be binding, think of the Cunsumer Rights Act you are covered by it regardless.

 

The proportionate element refers to a percentage and is covered in the Decisions above. They take the percentage of the cost of the policy and apply it to the benefit. The FOS agree with this process and can be seen in the decision

 

I'm afraid that this accords with my feeling about it – unless somebody can identify the source which says that the provisions of the act must be expressly included in the contract

[BankFodder]

In fact section 4 of the act:

 

Quote

Qualifying misrepresentations: definition and remedies

(1)An insurer has a remedy against a consumer for a misrepresentation made by the consumer before a consumer insurance contract was entered into or varied only if—

(a)the consumer made the misrepresentation in breach of the duty set out in section 2(2), and

(b)the insurer shows that without the misrepresentation, that insurer would not have entered into the contract (or agreed to the variation) at all, or would have done so only on different terms.

(2)A misrepresentation for which the insurer has a remedy against the consumer is referred to in this Act as a “qualifying misrepresentation”.

(3)The only such remedies available are set out in Schedule 1.

 

http://www.legislation.gov.uk/ukpga/2012/6/section/4/enacted

 

 

Makes clear the necessary conditions for the act to have effect – and it says nothing about specific inclusion in the contract – and it would certainly have done if that had been necessary

[Mwynci]

I might have jumped the gun here, I'll do a bit more digging to check. 

 

I'll come back either way. 

 

 

[BankFodder]

And in any event, if you really want to challenge the insurer on this then you are looking at some kind of result maybe six months or 12 months down the line. I don't know if there is any risk of the insurer changing the position and deciding that your representation was more serious than they originally thought.

It's up to you but I would suggest that you put aside matters of principle. Take the money which is on offer now and then claim for the rest. Of course we will help you all the way – as we always do – and as we would have done immediately after your accident

[Mwynci]

Yep - I can't see anything to back up my point,  I'll have to accept i was wrong. 

 

- it's harsh though. 

 

Sorry to get your hope up OP. 

[BankFodder]

Well I'm going to disagree that it's harsh. I'm certainly not on the side of the insurance industry – but I have to say that they had to be protected from being misled when they are considering whether or not to accept an insurance risk.
As was helpfully pointed out by Cagger @MH1927 implied terms are a well established technique for fleshing out a contract and making sure that people don't simply rely on the written word. It works for consumers and it's not at all unreasonable that it can work for businesses as well.

[Ethel Street]

2 hours ago, Mwynci said:

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. 

 

 

This is not correct. 

 

Insurers have had a statutory right under the Consumer Insurance (Disclosure and Representations) Act 2012 (Schedule 1,  paragraphs 7 and 8 ) to proportionately reduce a claim where there has been "careless misrepresentation" by the insured. As it's a statutory right it does not have to appear in the insurance policy (and if it did appear it wouldn't be in the 'average clause' - that's not what average in insurance means). Insurers might choose to reference their right in the policy but they don't have to.

Edited July 9, 2020 by Ethel Street

[BankFodder]

I wonder if this idea is really generally applicable. Although I don't have immediately to hand any examples of where statute must be invoked in order to confer rights, it is certainly possible to exclude rights by reference to them in a contract – and the Contracts (Rights of Third Parties) Act 1999 springs to mind where you can exclude the rights of a third party to bring an action on a contract by specific reference within the contract

[unclebulgaria67]

Must be a positive if the Insurers are now using the legislation as it was intended. It is just that I have not heard of it being used for Car Insurance, as the 22% comes from the Insurers rating calculations, which is not available information to the Policyholder. With Home Insurance, if you Insured a Building for £100k, when it should have been Insured for £122k, it is easier to grasp.

 

The Insurers would have issued the policy documents clearly showing that no motoring offences had been included within the premium calculation and the OP has had 5 months to correct the record with Insurers before the accident.

 

Perhaps probe the Insurers on the 22%. Can they provide evidence from their Underwriting rating guidance that this is the extra premium for 2 SP30's.

[Ajr3773]

5 minutes ago, unclebulgaria67 said:

Must be a positive if the Insurers are now using the legislation as it was intended. It is just that I have not heard of it being used for Car Insurance, as the 22% comes from the Insurers rating calculations, which is not available information to the Policyholder. With Home Insurance, if you Insured a Building for £100k, when it should have been Insured for £122k, it is easier to grasp.

 

The Insurers would have issued the policy documents clearly showing that no motoring offences had been included within the premium calculation and the OP has had 5 months to correct the record with Insurers before the accident.

 

Perhaps probe the Insurers on the 22%. Can they provide evidence from their Underwriting rating guidance that this is the extra premium for 2 SP30's.

@unclebulgaria67 your point is particularly valid especially in regards to loss in the event of a claim. Irrespective of 2x SP30’s or not the vehicle is insured for its full market value. The insurers rating changes based on risk against those endorsements, where said risk calculation isn’t made available. 
 

Also I question the validation of 22% in premium. Is that based on today’s risk profiling, or is that applied retrospectively to day 1 and can that be evidenced. 
 

One thing that is very clear, is that to bring about any degree of misrepresentation the insurer has to have evidence that questions were asked in regards to the endorsements.
 

This was an auto renewal and when I’ve checked the Brokers electronic Copy on “My Policy’ at renewal, there is no section included relative to accidents in the last 5 yrs or Motoring convictions. Everything else relative to me and the named driver is listed. 

[BankFodder]

34 minutes ago, Ajr3773 said:

 

One thing that is very clear, is that to bring about any degree of misrepresentation the insurer has to have evidence that questions were asked in regards to the endorsements.
 

 

 

. I'm sorry but this is not correct. There is a very long established rule that you are required to exercise utmost good faith (uberrima fides) when becoming a party to any kind of insurance contract.
This means that you have quite a strict duty to accept responsibility for disclosing any information which a reasonable person in your position might understand could materially affect the risk.

I can imagine that the interpretation of this rule would not be applied quite so strictly to a very new and young driver – but the more that one has been driving and the more insurance policies one has held, then I think that the stricter  this rule becomes.
It is also well established that one can misrepresent something simply by withholding information – by silence.

I'm sorry to say that I think that this rule and the value of it is so self-evident that it is scarcely worth discussing.

I wouldn't start raising this issue if I were you with insurers or the courts because you will come away with a bloody nose and loss of credibility

[Ethel Street]

Arguing with the insurer about whether the 22% additional premium they would have wanted at renewal if they had known about the two SP30s is justified is likely to be a waste of time. The insurer doesn't have to prove it to you. In practice it'll be what came out of their computer when they re-ran the calculation of renewal premium with the two SP30s added. If the two SP30s were in the same year then a 22% increase in premium is the sort of increase you'd expect. It doesn't seem outrageous or unreasonable. 

 

It would be surprising if the information you were sent before auto-renewal took place didn't mention the need to notify any changes in your circumstances to insurers. Courts are not very sympathetic to drivers who claim they didn't know they had to declare motoring convictions. Judges tend to take the view that every driver knows the significance of motoring convictions to their insurance premium.

 

The value of the vehicle only plays a small part in the deciding the premium. 

[Ajr3773]

@BankFodder @unclebulgaria67 Open question to you both. Is there an option here to suspend claim with my Insurer and proceed to claim directly with the TPI given it’s non fault and liability has been accepted and is on file. If so what’s the suggested process. 
 

Insurer has declared the vehicle a total loss this morning but claim is currently on hold until they obtain statement of fact from broker. 

[BankFodder]

I don't think you are reading the posts on this thread very closely.

I have already suggested that you should accept the money from the insurer and then pursue the third party for the difference.

If you reject the payment offer from the insurable then you are left with trying to recover a sum of over £20,000 and you might have to enforce its my court action which will increase your risk factors because you're no longer claiming on the small claims track.

I suggest you read through carefully what has been posted here and then come back and comment on that

[Ajr3773]

On 08/07/2020 at 19:44, BankFodder said:

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

@BankFodder I refer to your very first response to my post, where you advise me to pursue the at fault driver myself, hence asking again. 
 

On what basis would it need to go to court when liability has been accepted and also witnessed by police and other affected parties. 
 

Is it not a case of just having the Third Parties Insurer handling the claim? 

[BankFodder]

I don't know what basis it would need to go to court – but I can imagine that if you start trying to claim against the third party then they will be looking for ways out and they will try to make it tough for you – even though I don't think that they stand much chance of success. So on that basis you need to be ready to push this to court if necessary.

In respect of the question you are asking about having the third party's insurer handled the claim, I have already addressed this yesterday at 7.39 in the morning and once again you don't seem to be reading the posts very closely.

[Manxman in exile]

On ‎10‎/‎07‎/‎2020 at 07:13, Ajr3773 said:

... 
 

One thing that is very clear, is that to bring about any degree of misrepresentation the insurer has to have evidence that questions were asked in regards to the endorsements.
 

This was an auto renewal and when I’ve checked the Brokers electronic Copy on “My Policy’ at renewal, there is no section included relative to accidents in the last 5 yrs or Motoring convictions. Everything else relative to me and the named driver is listed. 

 

I know this is over a week old, but just to say:

 

1.  Am I understanding correctly what you say above?  Are you saying that the auto-renewal notice from your insurer made no mention at all of the importance of checking that the details were still correct, and you were not asked for any changes since the last renewal?  If they didn't, then I would have thought you may have grounds to complain to them and then to the FOS.  But I find it almost wholly impossible to believe that the renewal notice did not ask you specifically if there had been any changes since last renewal.  (I'm assuming that the two speeding convictions were after the previous renewal and that you haven't been failing to declare these convictions for a longer period, have you?).

 

I think I would differ from BankFodder in saying you are obliged to disclose the convictions even if you weren't specifically asked about them.  It certainly used to be the case that contracts of insurance were "uberrimma fides", but my understanding is that Parliament changed that position some years ago and you are now only obliged to answer truthfully any questions you are specifically asked - I don't believe you are obliged to volunteer answers to questions you are not asked.  (I would check that if I were you).

 

2.  Personally, I might not want to pursue a complaint because I think you're fortunate not to have had the policy voided for a "reckless" rather than a "careless" misrepresentation.  You said in an earlier post that you didn't bother to check the details on the renewal and that sounds to me pretty much like making a representation "not caring whether it was true or not" - which I would use as the definition of reckless.

 

My sympathies are with you about getting caught up with a management claims company.  We were referred to one by our insurers when our car was written off in an accident.  They were useless and impossible to deal with.  We should have done what you should have done - sued the third party directly ourselves.  Sorry - that's not what you want to hear right now...

[BankFodder]

1 hour ago, Manxman in exile said:

It certainly used to be the case that contracts of insurance were "uberrimma fides", but my understanding is that Parliament changed that position some years ago and you are now only obliged to answer truthfully any questions you are specifically asked - I don't believe you are obliged to volunteer answers to questions you are not asked.  (I would check that if I were you).

 

 

 

This would surprise me enormously and I'd like to see the source for this please because it's an important point

[Manxman in exile]

I'll have to check but I think it's now covered by the Consumer Insurance (Disclosure and Representations) Act 2012 and/or the Insurance(?) Act 2015.

 

As I understand it, when applying for insurance you are only obliged to answer the questions you are asked.  If you aren't asked about something then you don't need to disclose it.  The days of "uberrima fides" governing what does and does not need disclosing are now over.  An insurance company now must ask clear and non-ambiguous questions.  A lay person applying to an insurance company is not expected to know what should or shouldn't be disclosed.  They are only expected to answer truthfully the questions they are asked.*

The OP here seems(?) to be saying that he wasn't asked if there were any changes in the information previously disclosed to the insurer.  If that was the case (ie they weren't asked) then I think they may have a legitimate complaint against the insurance company.  However, (1) I find it incredible that the insurer would not ask, and (2) I'm wondering whether this may not have been the first year the OP has not declared the convictions (ie they may have been asked the question previously and not given the correct answer).

Also, as the OP by their own admission simply didn't bother to check the details on the renewal at all, I think they're lucky the insurer hasn't voided the policy for reckless misrepresentation.  You can't get much more reckless than totally failing to check the details.

 

*I needed to look into this a couple of years ago for travel insurance for myself because I knew the law had recently changed and I wanted to check what I had to disclose.  What I've put above is what I recall off the top of my head.

 

 

[Ethel Street]

3 hours ago, BankFodder said:

 

This would surprise me enormously and I'd like to see the source for this please because it's an important point

 

The Act quoted on this thread is the relevant law - the Consumer Insurance (Disclosure and Representations) Act 2012 which came into force in April 2013

 

The traditional law of utmost good faith ("uberrima fides") applying to insurance contracts was abolished by that Act for consumer insurance contracts and replaced by a requirement that insurers must ask specific questions about matters they considered relevant and a duty on insureds to respond honestly and with reasonable care to questions asked. So, importantly, the insured in a consumer contract no longer has to volunteer material facts that an insurer does not ask about.

 

Many websites at the time set out the implications of the Act, eg

 

https://www.abi.org.uk/data-and-resources/tools-and-resources/how-to-buy-insurance/what-the-consumer-insurance-act-means-for-customers/

 

https://www.pinsentmasons.com/out-law/guides/the-consumer-insurance-bill

 

https://www.stevens-bolton.com/site/insights/publications/duties-of-disclosure-in-consumer-insurance

 

The Law Commission site explains why they proposed the 2012 Act, in particular that the previous law of utmost good faith was unduly harsh on consumer policyholders who has acted honestly and could not reasonably have been expected to know what the insurer considered a material fact if they had asked no questions about it.

 

https://www.lawcom.gov.uk/project/consumer-insurance-law-pre-contract-disclosure-and-misrepresentation/

Edited July 19, 2020 by Ethel Street

[BankFodder]

I get the impression that the legislation has not actually abolished the principle of uberrima fides – but has rather sort of watered it down.

In other words that there is a greater emphasis on insurers to ask relevant questions – but also it seems to me that there still remains a responsibility on an insured person to disclose details which a reasonable person in the circumstances would understand would affect the insurer's decision as to whether or not to insure.

The change is that previously, even if the insurer didn't ask any questions and even if there was no real reason that the person seeking insurance should realise that something could affect the risk – now there is a responsibility of "good faith", if you like – as opposed previously to "utmost good faith".

Frankly I think that whether the questions were asked or not, failure to disclose two previous convictions which relate to the quality of driving are significant and would amount to a misrepresentation and at the very least they would be a careless misrepresentation.

So at the end of the day I don't think there is much that affects my initial view given that the legislation clearly allows the insured to deduct a proportion

[Manxman in exile]

I agree that it would seem obvious that you should disclose that you've had two speeding convictions in the previous year... but I'm not sure that that is a view shared by the FOS.

 

If (and I emphasise "IF") the OP is correct, and they were not specifically asked at renewal, then I think I'd be considering making a formal complaint on that ground, and I suspect if it got to the FOS the OP might be successful.  They've got nothing to lose anyway.  That is assuming the OP was not asked - which, to be honest,  I find incredible.  (And if they were asked, I think they've been very lucky to be offered any sort of payout at all, and not have it voided).

 

In my case I was buying travel insurance and knew they would ask me about any* medical treatment/advice etc in the previous 12 months, and whether I'd had any cardiac problems in the previous five years.  I had had no cardiac problems in the past five years, but had had five years and two months previously.  Now, you'd think it obvious that this would need to be declared, but no - I was advised that I only needed to answer the precise questions they asked.  When I bought the insurance and was asked the question, I answered truthfully and I also pushed my luck by asking if they needed to know about any heart problems more than five years ago.  I was told "No.  If it's not within the last five years, we don't need to know".  That was my experience.  So long as a consumer truthfully answers the questions the insurer chooses to ask, there should be no question of failing to declare anything.  That's my understanding.  Whether somebody should take that risk or not is a different question.

 

*As a post-script, many people come unstuck with travel insurance at this point by not understanding the wide scope of "any medical treatment or advice".  It includes regular treatment for anything like hypertension or migraines, any routine or non-routine tests, and any visit to your GP.  Basically that means almost everyone who buys travel insurance needs to declare something.

Edited July 19, 2020 by Manxman in exile