We investigated Fiona and Eleanor's complaint when insurers refused to pay because of underinsuring.

What happened

Fiona wanted to insure the contents of her home. She lacked confidence when it came to finances, so she asked her daughter Eleanor to help.

Eleanor did a bit of research. She asked her mum what some of the more expensive items in the house were, and looked online to find out how much they were probably worth.

She then searched for and found a policy online and filled in the online form. The insurance company phoned to get a few more details. During the call, they said that it was worth double-checking the value of the jewellery. They said that if it turned out to be more expensive than she was saying, she wouldn’t get the full value back if she ever claimed.

Unfortunately, Fiona's home was broken into later that year. Fiona asked her daughter for some help and she called the insurer to make a claim. They contacted her a month later to make an appointment for a loss adjuster to visit. The earliest appointment was four weeks’ later.

While visiting, the loss adjuster gathered evidence for the stolen items. He provided a report to the insurer a month later which said that the claim should be paid. He did have concern: the contents of Fiona’s home had been considerably underinsured.

Fiona had cover in place for up to £10,000 worth of high value items, such as jewellery, but the report valued the missing jewellery at around £100,000. The loss adjuster recommended the insurer to pay Fiona the £10,000.

But when the insurer received the report, they concluded that Eleanor hadn’t told them the true value of Fiona’s possessions. They said that if they’d known the true cost of replacing everything they wouldn’t have initially offered insurance. So they cancelled the policy.

Eleanor complained as she said she'd been honest. She said that it had never occurred to her that claiming an amount less than the jewellery was worth would mean the insurer would pay nothing at all.

The insurer wouldn’t change their mind so Eleanor made a complaint on Fiona's behalf.

What we said

Eleanor took us through what happened. We asked her what had been asked by the insurer and requested screenshots of their online forms, and a recording of the follow-up call.

When we received the screenshots, we realised what had happened. On the form there was the question: ‘what is the total value of the contents to be insured?’

There was a ‘further information’ box in small print, placed a considerable distance from the question.

Eleanor had understood the question to mean, ‘what’s the total value of the contents you want to be insured?’

She said Fiona was happy to take the risk that not all her contents would be insured but £10,000 of the jewellery was really special to her. The insurer told us it had meant ‘what’s the total value of all the contents in your home?’

We decided that as the question was ambiguous, and that it was unfair to penalise Fiona.

Also, we couldn’t see any efforts by the insurer to warn Eleanor or Fiona about the consequences of underinsurance. The insurer’s representative had only suggested that Fiona wouldn’t ‘get the full value back’. They should have said that she might get nothing back at all, in the event of a claim.

We thought that if this question had been clearer and Eleanor warned about the consequences of underinsurance, she would have acted differently.

We gave the decision that seemed fairest to both sides. We said to:

  • reinstate the policy and reconsider Fiona’s claim, bearing in mind the existing limits in the policy for items such as jewellery
  • tell the insurer to remove any references to Fiona having a policy ‘voided’
  • ask the insurer to pay Fiona £200 in compensation for the distress and inconvenience of its poor claim handling