Group policies

Jurisdiction

The FOS is entitled to consider complaints brought by or on behalf of an “eligible complainant”. Businesses can only be eligible complainants if their turnover is less than £1m. This raises a particular issue with group policies – which are typically purchased by an employer for the benefit of its employees. Some insurers have argued that if the employer had a turnover over £1m or more, any complaints made by employees could not be considered by the FOS.

The FOS has pointed out in Ombudsman News 32 that this argument overlooks the impact of DISP 2.4, which contains a provision that “an eligible complainant” includes “a person for whose benefit a contract of insurance was taken out or was intended to be taken out”.

Consequently, there are two possibilities:

  • The policy is not for the benefit of the employee. This would be so if, for example, the policy was intended to cover the employer's own contractual liability for sickness payments, or if it were to cover a business risk – for example in the form of a key person insurance. In such cases the matter is outside the FOS's jurisdiction (Ombudsman News 7).
  • The policy is for the benefit of the employee. In such a case it doesn't matter if it also provides benefits for others: the complaint will be within the jurisdiction of the FOS.

Jurisdiction

A particular problem arises with group medical expenses insurance. An employer is free to transfer a group scheme to a new insurer and frequently this is on the basis of guaranteed “protected underwriting terms”. In other words, anyone who is already suffering from a medical condition will continue to benefit from cover. But the new policy may be subject to exclusions which did not apply to the old.

Typically the insurer will leave the employer to make employees aware of the new terms. However, the FOS will not always agree that this is appropriate in cases where the insurer has details of the employees who are adversely affected. The FOS may take the view that the insurer should take reasonable steps to ensure that employees are given the relevant information. If the insurer fails to do so, the FOS may not support the rejection of claims based on the new terms.