Far too often homeowners are advised poorly when it comes to making small claims within their home insurance policy. Claim Advisers can be far too quick to tell the client the good news that a claim can be paid without educating them of the medium-long term implications on their policy and their premium. It is a delicate matter discussing claims with clients and a true skill, never the less it is imperative the insured is advised correctly by their Insurance Company/Broker when making claims. This is a problem experienced many times especially when dealing with Banks and Direct insurers because the claims team are not trained in underwriting, their to discuss such matters with the policyholder. Their job is to deal with a claim and not to discuss any form of underwriting matter. Below are the reasons why small claims and totting up small claims can create serious implications for a homeowner:
- Home insurance works on the basis of No Claims Bonus and up to a maximum of 5 years bonus can be obtained by a homeowner. However one claim will wipe all of the No Claims Bonus (protecting the bonus is not a possibility) causing an increase to the renewal premium at the next renewal date. Home insurance premiums are increasing anything between 5% – 10% for a policy that is claim free, but for policies under which a claim has been made, the policy holder can generally expect an increase of between 10% – 25% increase and even higher for multiple claims!
- Too many claims within a 5 year period can cause an insurer to apply exclusions to a policy and in the most severe cases even refusal to provide insurance. The old insurance principal of Frequency to Severity is of huge importance here. Insurers don’t like risks with multiple claims!
- A claim, especially within the last 12 month period will make the insurance less attractive to alternative insurers and more often than not they will not provide a quotation. Therefore even if poor claims service has been experienced by the homeowner then they are likely to be left with no other alternative than to renew with the existing insurer. This is on the assumption that the existing insurer will actually offer renewal terms! Many of the lower quality insurers will not!
It is only at this point that many homeowners find there is a problem and this seems to be an increasingly common problem. Therefore if a small claim is experienced I would always recommend, or at least suggest to my clients, that they consider funding the claim themselves to avoid future premium increases in the future. It is a tough conversation to have but, it is essential that the client receives honest and professional advice, rather than finding themselves in a very difficult, and expensive situation at the next renewal date and possibly further renewals in future years.
For further information contact Carl Sharp on 0118 9165 487
*Information correct as of 1st May 2016