Types of complaints we see
Customers often complain that:
- the policy was mis-sold
- the policy wording was misleading
- you wrongly refused to pay the claim because it applied an exclusion or a limitation that shouldn’t have been applied
- you didn’t do enough to put things right to settle the claim
What we look at
Many customers complain that they:
- weren’t aware of, or didn’t understand the conditions and exclusions in the policy
- were told at the point of sale that the policy would cover any eventuality – not the specific insured risks that were actually covered
Because extended warranties are usually sold in retail stores, there’s often a quick and simple sales process with no record of how the sale took place. The only evidence available is from the customer and their account of what happened at the time.
We’ll examine documents given to the customer at the point of sale. You’re responsible for any representations made in those documents. We might say that the policy was mis-sold if your documentation or sales conversation didn’t:
- make clear what was covered by the policy
- highlight any unusual limitations or exclusions which would reduce the cover
- make clear that the type of damage included could have been covered by another policy the customer has (like contents insurance)
We see cases where the customer complains that the policy wording was misleading or ambiguous – and led them to misunderstand what was covered by the policy.
Customers usually have only a limited opportunity to read and understand the policy. So we’d expect you to honour any reasonable expectations about the terms and conditions of the cover – where we’re satisfied you haven’t been clear, fair and not misleading.
Complaints that an exclusion or limitation was applied when it shouldn’t have been
Customers usually need to show evidence that their insured item is damaged or not working. Usually you’ll want to examine the item, or they can do this by sending you a photograph.
If we’re satisfied that the item is damaged or not working properly, then we’d look at the evidence to decide whether any relevant exclusion or limitation in the policy applies.
Claims are often dismissed on the basis that the damage resulted from wear and tear.
Damage caused by ‘wear and tear consistent with the usage of the furniture’ is often excluded under policies. We see complaints about insurers relying on this exclusion where there is:
- wear and tear after a relatively short period of time
- excessive loss of resiliency
- separation of seams/stitching
- peeling of the leather/protective coating
- colour loss or staining
We see a lot of complaints that are rejected as wear and tear and relate to furniture that is less than two years old.
In these cases we examine any evidence of excessive or unusual use of the furniture by the customer. If we find this, we may decide that you’re entitled to reject the claim. If there’s not enough evidence of excessive or unusual use, we may decide that a claim can only be rejected for wear and tear reasons if the damage is consistent with the expected life-span of the item.
We’d usually say that if you expect substantial wear and tear to happen within the period covered by the policy, then you shouldn’t be selling policies for that duration. We view substantial wear and tear as being sufficiently serious or extensive to cause significant problems with the use or appearance of the item.
If you’re rejecting a claim on the basis that the damage was caused by ‘wear and tear consistent with the quality of the furniture’ we’d usually say that you’re blaming the poor quality of the item for the damage. You should take the quality of the item into account when agreeing to provide cover.
Where furniture cushions sink or collapse, we see complaints about claims rejected on the basis that this loss of resiliency wasn’t excessive – and is down to wear and tear.
Policies may define excessive loss of resiliency as being ‘a flattening beyond the manufacturer's tolerances’.
We’ll examine any evidence of excessive or unusual use of the furniture by the customer. If there’s compelling evidence of this, we may decide that the insurer was entitled to reject the claim.
We see complaints about claims that have been rejected on the basis that the loss of resiliency was what would be expected of a particular type or brand of product. These claims are often made only one or two years into a five-year policy where excessive loss of resiliency is listed as an insured risk.
We’ll usually decide that if an insurer offers a policy for a certain period of time – and agrees to provide cover for excessive loss of resiliency – then it should meet claims for excessive loss of resiliency within that period. Cover should be offered for a shorter length of time if loss of resiliency within that period would be regarded as normal wear and tear.
Some policies specifically state that they’ll cover separation of seams and stitching. Some customers complain that their claim was rejected on the basis that:
- the fabric covering the furniture has come away at the seam, but the stitching remains intact and so there is no separation of the actual seam
- although the seam itself is coming apart, the stitching has not split
We’ll usually say that it’s fair for the customer to expect that if the fabric covering the furniture comes away from, or at, the seam, then this is a separation of the seam and is covered by the policy.
Where the leather or protective coating on furniture has peeled, we see complaints about claims rejected on the basis that the peeling is down to wear and tear and excluded under the policy.
In these cases we examine any evidence of excessive or unusual use of the furniture by the customer. If there’s evidence of this, we may decide that you’re entitled to reject the claim.
We also see complaints about claims rejected because:
- it was the protective coating, rather than the leather, that peeled – meaning there was no structural defect
- the damage was due to cracking and splitting rather than peeling, and so isn’t covered by the policy
If we think it was fair for the customer to expect that these types of damage would be covered – we’ll expect you to deal with the claim.
Some claims are rejected because of colour loss to, or staining of, the fabric of the furniture. This might happen when you provide a cleaning kit to a customer – and then reject a claim for colour loss or staining on the basis that the customer didn’t clean the product correctly.
If this happens, we’d usually say it wasn’t fair and reasonable for you to reject a claim for damage caused, or increased by, the kit that you provided.
Putting things right
A customer complains that you didn’t do enough to put things right
Extended warranty insurance policies are often based on the principle of indemnity. This means that you need to put your customer in the position they were in before the loss or damage. Depending on the wording of the policy, this can be done by:
- making the necessary repairs
- replacing the necessary items
- offering a credit note as settlement
- offering a cash settlement
If a customer doesn’t believe that what you’ve offered is enough to put things right, we’ll examine all the evidence provided and decide whether your approach to settling the claim:
- is fair and reasonable in the circumstances
- satisfies the principle of indemnity
Some insurers include a clause limiting their maximum liability to the purchase price of the insured item – no matter how many claims are submitted. If this clause is enforced we’ll usually find that it isn’t fair and reasonable to penalise a customer for an unsuccessful repair.
If you can’t offer a repair, a replacement or a credit note that the customer can use to buy a replacement item – then we’re likely to say you should offer a cash settlement equivalent to your maximum liability.
If we decide that a policy was mis-sold, we’ll tell you to either deal with the claim or to refund the premiums paid by the customer – with interest.
If we decide that you’ve unreasonably rejected a customer's claim, we’ll usually tell you to either re-assess the claim, or meet the claim in full.
If we decide you didn’t do enough to put things right to settle the claim, we’ll usually tell you to change the offer or increase it – if you were offering cash or a credit note.
If your customer is due money as a result of our decision, we’ll usually ask you to pay interest at 8% from the date of the damage to the date of the actual settlement.
We may also decide that you should compensate the customer for distress and inconvenience.