Is insurance just for peace of mind?
Most people realise how important it is to insure their home and possessions as a safeguard against their worst nightmares becoming a reality. Be it burglary, storm damage, fire or flooding, virtually everyone has insurance which enables them to sleep at night, not worrying about being left out of pocket or with nothing after a major disaster.
Or so you would think. But as keen as the industry is to collect premiums from you, things are quite different when an insurer has to pay a claim. Even a simple small claim such as a handbag loss can result in a disputed claim requiring proof of original costs (receipts) and police crime number etc. Even when the claim is eventually paid (ours took over a month) the following years premium increased by over 30%.
So it is hardly a surprise that this grubby industry is dragging its heels in settling claims from those flooded in January. This, despite the Prime Minister David Cameron saying on national television that he was “putting insurers on notice that they needed to pay up the money fast” So how can it be that, according to the Association of British Insurers, 7,480 householders, that is 40% of those who made a claim for flood damage this year, are still waiting to be compensated by their insurer? The ABI figures also highlight that 2,600 will still be waiting at Christmas! Around a 100 families on the Somerset Levels are still in temporary accommodation, often living in caravans.
The ABI says it does not know the exact number of people living in temporary accommodation and insurers say not all outstanding claims are disputed and think that 85% of the flood claims submitted will be settled before the New Year. That would still leave 15% (nearly a sixth) who are still waiting!
Insurance is an industry that makes its profit from fear. Granted it’s a little short of a full-blown protection racket but it shares the same principal. Pay up or live in fear. Insurers assess the risk of a claim and charge a premium based on that risk. Basically they are taking a gamble just like a bookmaker. But the difference is the bookmaker always pays out when they lose! Insurers delay payment, send in loss adjusters to mitigate the claim value to the bare minimum, look for evidence of under-insuring, in fact anything they can do to reduce or get out of paying a claim. Even the NHBC, providers of insurance-backed warranties on UK new homes uses a minimum claim value to wriggle out of paying legitimate claims for example, treating each defective lintel in a home as a separate, low value, claim.
But could there be a more sinister financial reason why insurers are particularly slow in settling flood claims? Could it be that if they paid out all of the claims promptly as possible, certain insurers might get into financial difficulties? By spreading payments over 12 months, the claims can be settled using money they receive from new premiums throughout the year. Just a thought, obviously as the insurers and the ABI know that they have failed to comply with the Prime Minister, perhaps our government should not be quite so accommodating regarding helping the industry via “Flood Re“