Cover blown In­sur­ers’ id­io­cies

Why do in­sur­ers pe­nalise us for ‘stupid’ de­ci­sions such as leav­ing the keys in the ig­ni­tion, asks James Da­ley

The Daily Telegraph - Your Money - - FRONT PAGE - James Da­ley

The idea be­hind in­sur­ance is beau­ti­fully sim­ple. We all own things of value, which we couldn’t af­ford to re­place if some­thing bad were to hap­pen to them.

So rather than cross­ing our fin­gers in hope that the worst will never come to pass, we con­trib­ute a small amount of money into a pot that prom­ises to com­pen­sate us if our valu­able pos­ses­sions are lost or de­stroyed.

Few of us could af­ford to re­build our house if it burnt to the ground. But as the like­li­hood of that hap­pen­ing is fairly low, it’s mer­ci­fully cheap to pro­tect our­selves against the risk.

In­sur­ance to­day has evolved well be­yond its ini­tial sim­ple ori­gins.

Home in­sur­ance doesn’t just cover you against fire, it pro­tects against bur­glary, flood­ing, sub­si­dence, leak­ing wa­ter, fall­ing tele­graph poles, the cost of al­ter­na­tive ac­com­mo­da­tion if your home can’t be lived in – and dozens of other risks.

Th­ese in­no­va­tions are won­der­ful in many ways. But they’ve cre­ated an ex­tra level of com­plex­ity around in­sur­ance – in­clud­ing the aw­ful con­cept of the “ex­clu­sion”.

We’ll cover you if your house is bur­gled – but not if you left the win­dow open. We’ll cover you if your home gets flooded by a leak­ing pipe – but not if you left your heat­ing off for three weeks in win­ter while you went on hol­i­day.

We’ll give you a free rental car if you’re in­volved in an ac­ci­dent – but not if your car is writ­ten off.

In the strange world of un­der­writ­ing, there’s a clear or­der to th­ese ex­clu­sions. Most of them can ac­tu­ally be lumped un­der a hand­ful of much broader rea­sons.

First up – no one is go­ing to pay your claim if you’re a fraud­ster or if you de­lib­er­ately caused what­ever you’re claim­ing for. Fair enough.

But the sec­ond prin­ci­ple is more com­plex: in­sur­ers don’t want to pay your claim if you could have done any­thing to pre­vent the need for it.

In home in­sur­ance, for ex­am­ple, the num­ber one rea­son for re­ject­ing claims is that the in­ci­dent was the re­sult of “wear and tear”.

What that means is that if you’d looked af­ter your house, then what­ever you’re claim­ing for would never have hap­pened.

It’s easy to see why that’s a line that in­sur­ers would want to draw.

Af­ter all, your in­sur­ance is meant to cover you for the un­ex­pected, not some­thing that you could rea­son­ably have fore­seen.

If you build a house and don’t check the roof in 200 years, then even­tu­ally it will wear away and let the rain in.

That’s not an un­ex­pected event – it’s an event that was in­evitable and which you were just hop­ing wouldn’t hap­pen in the time that you owned the house.

Al­though the de­bate over what con­sti­tutes “wear and tear” con­stantly puts in­sur­ers at odds with their cus­tomers, it’s a line that on balance I think they can jus­ti­fi­ably hold.

Fail­ing to main­tain your house is care­less at best, reck­less at worst. Why should an in­surer pay?

The prob­lem, how­ever, is that this logic has now been stretched to ex­clude all acts of care­less­ness.

In short, in­sur­ers don’t want to pay a claim if you did some­thing stupid.

In car in­sur­ance, for ex­am­ple, a com­mon rea­son for re­ject­ing claims for stolen ve­hi­cles is that the driver left their keys in the ig­ni­tion.

By ex­clud­ing this, in­sur­ers are im­ply­ing that you were ask­ing for it (id­iot!) so don’t ex­pect us to pick up the bill.

But un­less you’re a fraud­ster, no one wants to have their car stolen.

If some­one leaves their keys in the ig­ni­tion for a few min­utes, to warm their car up on a cold morn­ing, it’s a mas­sive price for them to pay if their car is stolen – es­pe­cially if it’s a fairly new or valu­able.

And the chances of some­one steal­ing it were not that high.

If the thief was op­por­tunis­tic, then that’s bad luck. More likely, there’s one or two in­di­vid­u­als pa­trolling the neigh­bour­hood, look­ing for cars to steal – and you were the unlucky one.

If they’d pick-pock­eted your keys and stolen your car there would be no ques­tion about whether the claim was valid.

So why is it an open-and-shut case when some­one left their keys in the ig­ni­tion and nipped in­side for a mo­ment?

With the power of hind­sight, it’s easy for peo­ple’s ac­tions to look like pure stu­pid­ity.

But if they weren’t try­ing to get their car stolen, then the whole in­ci­dent will have been a shock and a mas­sive in­con­ve­nience – not to men­tion an ex­pense that they may not be able to af­ford. Isn’t that what in­sur­ance is there for?

The same goes for leav­ing a win­dow open at home.

Yes, it may have been stupid. But if it re­sults in some­one’s home be­ing emp­tied of their most valu­able pos­ses­sions, I can’t see why the in­sur­ance shouldn’t cover them.

It’s th­ese kinds of red lines that cre­ate so much of the bad feel­ing and mis­trust be­tween con­sumers and in­sur­ers.

In­sur­ance com­pa­nies need to think harder about leav­ing cus­tomers high and dry – even if the claim has been caused by stu­pid­ity.

Yes, it may mean that we all need to pay slightly more for our in­sur­ance – but I’m fine with that.

We’re all stupid some­times and we should be will­ing to stand by each other when the stakes are high.

‘Un­less you’re a fraud­ster, no one wants their car stolen’

If you leave your keys in the ig­ni­tion on a cold morn­ing, the in­surer will prob­a­bly not pay

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