Why Home Insurance claims are declined
Most people that have insurance policies in place, hope they will never have to use them. However, if you do have to put in a claim, you want to make sure that the policy covers what you need, when you need it most.
There should be no reason why a legitimate claim should not be covered but if a claim is declined, there can be several reasons for this.
Here are the most common reasons why it happens:
- Incorrect information when reporting the claim (an example of this might be giving incorrect details about how your kitchen was damaged. It’s essential you make your claims form as detailed and accurate as possible.)
- A lack of care at the time of the incident
- Non-disclosed or incorrect details in your insurance application at the outset (i.e., previous claims or likelihood of flooding)
- Not following the claims process properly
- You are not covered for the damage or event you are claiming for
One of the main concerns insurers have is the policyholder(s) not fully understanding the cover they have in place versus the cover they think they have or actually need.
Here are a few of the most common reasons insurers decline claims:
Accidental Damage
This is the most common kind of claim and made up 28% of home insurance claims based on data from 2022, this meant more than 21,500 claims were lodged due to some form of accidental damage. Whilst the vast majority of policies offer this cover, it is usually additional cover that must be selected at the point of sale and customers can be tempted to not include this in order to get a cheaper policy.
Personal Possessions Cover
This is cover for possessions usually worn or taken outside of the home such as watches, rings, laptops, or sports equipment. Again, this is additional cover and will add an additional premium to the policy, so is another area of valuable cover that the customer may choose not to add to keep the cost of the premium down.
Wear & Tear
Home insurance covers sudden and accidental problems such as escape of water or damage caused by a tree falling on the property in a thunderstorm. The policy won’t cover problems caused by general deterioration and normal wear and tear, like water leaks from faulty guttering or roof tiles or old / missing grout between tiles in the bathroom.
To evidence this growing trend, we have shared some data from our insurer partners.
50% of declined claims in the last 12 months on our AXA household scheme were declined because the client had no accidental damage or personal possessions cover or the peril or cause was not covered.
Ageas Insurance informed us that in their main Household scheme 31% of declined claims were for wear & tear and 27% due to there being No Insured Peril In Force.
Under the Financial Conduct Authority’s (FCA) General Insurance Pricing Practices Policy and the new Consumer Duty, insurers will continually review the products and processes they have in place to make sure their products offer value to customers; the product documentation is clear; and that policyholders receive a high level of service throughout the claim process.
However, insurers cannot and will not cover events or claims where the cover is simply not in place which is where the value and importance of their mortgage or financial adviser comes in.
If you are offering your customer’s a new home insurance quotation, make sure they know what is and isn’t covered within your recommendations and give examples of what could happen should they choose not to include certain areas of cover in the policy.
In addition, offer ALL your customers an ongoing home insurance review service to make sure they know the cover they have and the cover they need. It’s no good having a cheaper policy if it won’t cover the most likely claim events.