ABI Statement of General Insurance Practice

The ABI Statement of General Insurance Practice was withdrawn when ICOB (now ICOBS) came into force on 14 January 2005. However, in Ombudsman News 46 the FOS made it clear that its provisions may still be considered:

The principles found in the ABI statements remain useful examples of good industry practice, and as such we still take them into account.

The preamble to the ABI statement provides that it is only applicable to policies under which the policyholder is insured in a private capacity. However the FOS has decided to apply the statement in certain small business complaints. The rationale behind this controversial move can be found in Ombudsman News 39:

The rules under which the Financial Ombudsman Service operates state that we will determine a complaint by reference to what we consider to be “fair and reasonable” in all the circumstances of the case. In doing this, we take into account the relevant law, regulations, regulators' rules, guidance and standards, relevant codes of practice and, where appropriate, what we consider to be good industry practice. It does not always seem fair and reasonable to us to ignore totally the principles of the Statement when we look at commercial insurance disputes. Is it fair, for example, to say that a self-employed (sole trading) contractor should benefit from the protection given by the Statement when he insures his house contents, but not when he insures the tools he uses to carry out his job? If the Statement represents “normal insurance practice” then is it fair not to apply it to someone who takes out an insurance policy for their business or trade but who is, in essence, no different from a policyholder insured in a private capacity?

The FOS has identified various indicators which may help in deciding whether the statement should be applied. It is more likely that the statement will apply if a small business policyholder is:

  • self-employed (perhaps running a corner shop or a similar small business);
  • lacking experience in financial and legal matters;
  • without easy access to expert advice on insurance matters.

It is less likely that the statement will be applied if a small business policyholder:

  • uses an insurance broker;
  • operates as a limited company;
  • employs a number of staff;
  • could reasonably be expected to have a greater understanding of business issues than a private individual;
  • has knowledge or expertise of insurance matters – for example, whilst now working in a different sphere is, say, a retired solicitor or insurance broker.