These types of insurance are the subject of a rising number of complaints, according to a review by the committee that monitors the three-year-old code of practice for general insurance selling.
The code was introduced by the Association of British Insurers in 1989 with the aim of improving protection for consumers buying insurance not regulated under the Financial Services Act. Broadly, this covers all insurance not linked to investments.
ABI members are expected to enforce the code among their own sales staff and among any agents selling on their behalf. They must give the monitoring committee data on complaints and how they are investigated. The committee does not itself investigate consumers' complaints.
There was a sharp increase in the number of complaints, from 406 in 1989 to 880 in 1990, but this levelled out in 1991 at 789. In 1991 there were 177 complaints related to motor policies, 186 related to household policies and 406 'miscellaneous'. This category included many complaints about travel and loan-protection policies.
The report outlines one case where an insurance company was forced to pay out on a loan protection policy even though the complainant had never, technically, been eligible for the cover. He was not in full-time employment when he bought the policy and this was a condition of the insurance.
'The policyholder alleged that the agent knew this and, after investigation, this was found to be the case,' the report says.
Problems with loan protection and travel insurance are now being looked at by ABI committees.
The monitoring committee said the ABI needed to do more to ensure that policyholders were told clearly about the fine print in insurance policies, particularly exclusion clauses and restrictions. Customers also needed to be told about the necessity for them to disclose information that could affect claims and about how to complain.
In one case outlined by the report, a policyholder was misinformed by an insurance agent about a policy on a horse. The horse died during a point-to-point event and the claim was rejected by the insurer. The agent later said he had mistakenly thought the policy covered this activity and the insurer paid pounds 12,000 to the owner.
In another case, a policyholder asked an agent to clarify a cover note for comprehensive car insurance. The policyholder said the agent had never explained that the pounds 100 voluntary excesses on the policy would be compulsorily increased substantially if a claim was made.
The monitoring committee's report also notes that a number of pyramid selling organisations are now selling insurance and warns insurers that they need to look closely at this development 'to ensure that consumer interests are not compromised'.
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