Ombudsman tells of mice and mendacity: Vivien Goldsmith discovers what policyholders are complaining about

THE Insurance Ombudsman, Julian Farrand, made orders of pounds 4.5m to be paid out to aggrieved policyholders last year, but two out of three decisions upheld the view of the insurance company.

Most insurance companies, from Abbey Life to Zurich Life, are members of the scheme. Among the few that have not joined are Co-operative, Endsleigh and the medical insurers Bupa and PPP.

Nearly a quarter of cases concern life assurance, followed by motor, household and personal accident and sickness policies. But, Dr Farrand says, livestock and caravans generate the most passion.

Dr Farrand rejects attempts to paint him as a consumers' champion or the scourge of the insurance companies.

He believes that fraudulent claims are increasing. But he said some insurance companies that suspect fraud are finding small points of the policy as a reason for refusing to pay out, rather than confronting the issue. 'The person having a claim turned down should know the reason why,' he said. It is not enough that fraud should be suspected. Insurance companies have to go beyond the standard of proof in a civil court of 'the balance of probabilities', although not as far as the criminal test of 'beyond reasonable doubt'.

The Ombudsman's annual report includes a sample of cases to show how the bureau works:

Gameboy

A home contents policy covered accidental damage to television, videos and computers. But when a policyholder tried to claim for a Gameboy the insurer said it did not qualify as a computer.

The Ombudsman queried the rejection. The company replied: 'There would appear to be a difference of views between those people who say it is not a computer because it cannot be programmed and those who say that it is a computer . . . we are prepared to go quietly on this one and arrange settlement for the loss.'

Mouse

A policyholder claimed for new carpet after it had been nibbled by a mouse, saying that the rodent had stolen bits of the carpet. But the Ombudsman rejected this claim saying theft had to entail some dishonest intention and it was felt that the mouse was incapable of such base motives.

Leg

A travel policy included accident cover for the total loss by physical severance of one or both feet. A holidaymaker was watching a fiesta in Spain when a cannon misfired and severed his leg. Surgery was able to reattach it.

The Ombudsman said that the claim should succeed because the policy did not say that the loss of a foot had to be permanent.

Joyriding

A motorist's car was taken without permission by a workmate and written off in an accident. The joyrider was prosecuted. The insurance company did not want to pay up because under the policy the owner was the only person allowed to drive the car, and the wording invalidated the insurance if anybody else drove it.

But the Ombudsman said the claim should be paid as the joyriding was in effect theft.

Back injury

A roofer was unable to work after a back injury and claimed on his personal accident policy. The insurer obtained a video of the man jogging on the seafront and rejected the claim. But the Ombudsman's own consultant said the man was trying to get himself as fit as possible to return to work.

The insurer reluctantly paid up.

Serps

A woman took out a personal pension to take advantage of the Government's 2 per cent incentive. But the DSS said that the paperwork had been mislaid. After four years the pension provider was not prepared to offer compensation because it could not be proved that it was at fault over the paperwork. But the Ombudsman took the view that the burden of proof that the documentation had been properly dealt with rested with the insurance company, and compensation should be paid.

Radio

Two car radios designed to be removed from the vehicle were stolen from a policyholder's flat during a burglary while the policyholder was on holiday.

The contents insurance policy excluded motor vehicles and their accessories, while the motor insurance policy said it would not pay either, as the radios were not in the cars or a garage at the time of the theft.

The contents insurer finally agreed to pay half the claim.

(Photograph omitted)