TIPS FOR CONSUMERS
The insurer rejected Mr M’s claim on the grounds that he had failed to pay his premium for October. The premium was due on October 4. But when King Price submitted the debit order, it was returned unpaid. A second debit order was submitted on October 19, but it was also returned unpaid.
According to King Price, the second debit order was submitted in accordance with the 15-day grace period provided for under the Policyholder Protection Rules (PPR). In submitting the second debit order, King Price said it had complied with the relevant rule and that it was accordingly entitled to decline the claim.
The rule states: “An insurer shall ensure that a policy contains a provision for a period of grace for the payment of premiums of not less than 15 days after the relevant due date.”
The provision makes it clear that insurers must include a clause in their policies stating that if a premium is not paid for a specific month, consumers have the grace period within which to pay it. In Mr M’s case, the second debit order was submitted on October 19, which was 15 days after the first submission.
King Price argued that the grace period required by the rule afforded Mr M 15 days within which to pay the premium, failing which he would receive no cover, and that once the grace period had expired, and if no premium was paid, the insurer was free to take punitive action against Mr M, such as cancelling his policy or repudiating a claim.
The ombudsman, after considering the arguments by both parties, found that King Price’s interpretation of the rule was correct. “The insurer may submit a debit earlier than day 15, but will not be entitled to take any punitive action against the insured until the expiry of the 15 days,” the ombudsman said.
She found that, in attempting to effect a second deduction on day 15, King Price had satisfied its obligation in relation to the PPR, and she found that the insurer had complied with its statutory requirements and was entitled to reject the claim.
firstname.lastname@example.org • Does your motor vehicle policy provide cover for pothole damage? Read your policy and know your cover. • Times are tough, but don’t sacrifice your short-term insurance cover to save money. Pay your premiums to avoid a financial disaster. • Motor accidents are the most common reason for insurance claims. If you have a vehicle, you need cover to protect you, your vehicle, your passengers, other drivers and pedestrians.