Unclear documentation


The FOS has expressed concern about the lack of clarity in insurance documentation (ON4). These concerns may conveniently be regarded under four headings:

  • unclear questions in proposal forms;
  • words which are given a special meaning by insurers;
  • unclear policy terms;
  • misleading omissions.

Questions

A common problem faced by motor insurers is that of “fronting”. Premium rates can be high for young drivers. To enable their children to obtain a lower premium, some parents will “front” for them. Although the car is in reality for the use of a young driver, insurance is arranged in the parent's name. The young driver is noted as a named driver. The subterfuge will frequently be discovered at the claims stage, and may lead to the insurer seeking to avoid the policy.

Where “fronting” occurs, another vehicle will often be available for the parent's own use. Insurers have sought to identify such cases by including a question in the application form along the lines of “Do you have access to another car?”.

However, the FOS argues that the meaning of such a question is far from clear. What does “access” mean? Is access to another car once a year sufficient? The FOS suggests that if insurers want to know about the number of cars in a family they should ask that simple question.

Definitions

The FOS suggests that insurers may define a word in a way that differs markedly from its common usage. It gives the example of a travel policy with an overall limit of £250 for a claim in respect of “valuables”. The policy defined “valuables” as including:
photographic, audio, video and electrical equipment of any kind (including CDs, video and audio tapes), telescopes and binoculars, antiques, jewellery, watches, furs, perfumes, leather goods, animal skins, silks, precious stones and articles made of or containing gold, silver or precious metals. Policyholders are unlikely to regard some of these items as “valuables”. The FOS points out that they may well be surprised, therefore, when a claim for, say, a leather jacket, some tapes and a pair of binoculars exceeds the policy limit.

Unclear terms

The FOS refers in ON4 to a case where a table on the front of a travel insurance policy stated that money was covered up to £500. However, the policy included the following wording:

We will pay up to £500.00 for the loss or theft of cash or travel cheques, if you can give us evidence that you owned them and evidence of their value. We will pay up to £300.00 for cash for travel outside Area 1 and up to £150.00 for places within Area 1 for gold plus cover, winter sports cover and multi-trip cover only.

A “gold plus” policyholder claimed for loss of money when travelling to Corfu, which was inside area 1. The insurer applied a limit of £150. In upholding a complaint made by the policyholder, the FOS pointed out the lack of clarity in the policy terms; indeed, if the limit outside area 1 was £300, it wasn't clear when the limit of £500 would ever be applicable.

Omissions

The FOS has drawn attention in ON4 to the number of cases it sees where drivers have wrongly believed themselves to be insured to drive any vehicle. Typically, a policy will state "you are covered if your policy schedule includes this risk". In other words, if the policy schedule is silent on the issue, the cover is not included. However, the failure to make this clear in the schedule leads some drivers – particularly those that are young – to believe they are covered.

Insurers are, of course, legally correct in saying they are not obliged to state everything a policy does not cover. However, it seems to us that where a particular situation regularly causes problems, it would be in the best interests of motorists, insurers and the general public if insurers made the correct position abundantly clear.