How home insurance claims are handled often causes disagreements between homeowners and their insurers. In many cases, the Financial Ombudsman is called in to referee the dispute.
To help make guidelines for settling cases clearer, the ombudsman has decided to make the thinking behind settling claims clearer.
New for old repairs
Most home insurance policies have ‘new for old’ cover that lets the insurer decide whether a claim is settled by replacement, repair or cash compensation. In some cases, the ombudsman looks at whether the insurer has made the right decision for the home owner’s benefit.
If home insurers opt for a repair, the ombudsman feels the insurer should pay to put the repair right if they have chosen the firm undertaking the work – and the opposite if the policyholder has chosen the repairer.
This is more complicated when the insurer has asked for quotes and the policyholder has asked the insurer’s loss adjuster to help find the estimates. In this case, generally, the ombudsman will make the insurer pay if the repairs go wrong.
Even if the repairer was chosen by the claimant, if the repair goes wrong and the insurer controlled the work by specifying materials etc, the bill lands with the insurer.
Replacing sentimental or special possessions
Replacement is a contentious issue for many policyholders. The ombudsman’s view is that if the item is jewellery that is antique or specially-commissioned, then it would be unfair for the insurer to insist on the policyholder buying a modern substitute from a major high-street retailer.
In such cases, the ombudsman usually lets policyholders choose where they buy a replacement and they are entitled to a cash settlement (without deducting a discount) if they cannot find an acceptable replacement.
Replacing day-to-day belongings
Where a reasonable replacement can be obtained from a high-street retailer, insurers often specify which one – because they have a discount arrangement with that particular retailer.
This is reasonable if the consumer lives within easy travelling distance of that retailer – and the retailer can provide a reasonable replacement.
Similar issues arise if the insurer offers vouchers that can only be exchanged for goods sold by a particular retailer.
Home insurance cash settlements
Sometimes, policyholders prefer a cash settlement even though there is no practical reason why they could not visit the insurer’s preferred retailer – and that retailer is able to provide a reasonable replacement.
In these cases, the ombudsman considers deducting any discount the insurer would have received is not unreasonable.
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