View from City Road: Insurers must beware own goals

It is not difficult to find disgruntled policyholders who think they have been ripped off by insurers refusing to pay their perfectly legitimate claims. It is much harder to discover whether unfair treatment is genuinely widespread. The truth will only emerge if there is a large study.

Insurers are certainly trying to avoid paying up unnecessarily - hence today's London conference on 'Denying coverage in insurance claims'. But if their intention is to make vast profits, they do not seem to be very good at it. The UK insurance industry has made underwriting losses for most of the past two decades.

Insurers have nevertheless become obsessed with fraudulent claims. Supposedly learning from the October 1987 storms, when thousands of claims were paid without question, policyholders have allegedly become much readier to claim, and to exaggerate. This happens, but none of the estimates for fraud that the industry has produced is convincing. Insurers have grown used to treating every claim as potentially fraudulent. And it is this mentality that causes so much damage to customer relationships.

It is equally wrong for consumers to regard insurers as a soft touch. The more insurers pay claims unquestioningly, the more they will have to put up premiums.

But unless they want to become as unpopular as the banks - with their aggressive and badly explained charging policies - insurers must stop looking as if they are wriggling out of claims. The cost of borderline claims will have to be priced into their underwriting.