Claims and dispute resolution
Claims and dispute resolution
This domain follows a claim from notification to payment or rejection, then through complaints and formal dispute routes. The exam tests practical claim handling, fraud, late payment and the limits of each dispute forum.
Core rules
- Notification and cooperation. The insured must notify in accordance with the policy, provide evidence, mitigate loss and avoid prejudicing the insurer's position. A claims condition may be a condition precedent to liability; the insurer must show breach and the contractual consequence.
- Investigation and indemnity. The insurer assesses proximate cause, policy limits, excesses and exclusions. Payment should put the insured in the same financial position, subject to average, underinsurance or reinstatement terms.
- Fraud. A fraudulent claim can lead to refusal of the whole claim, recovery of sums already paid, and termination of the policy for the future. The fraud must relate to the claim; exaggeration can be enough if it is dishonest.
- Late payment. The Enterprise Act 2016 implies a term requiring payment within a reasonable time. An insured may claim damages for loss caused by unreasonable delay, separate from the claim itself.
- Complaints and FOS. Firms need an internal complaints procedure. Eligible complainants can ask the Financial Ombudsman Service to decide a dispute fairly and reasonably; if the complainant accepts the decision, it binds the firm, subject to the award limit.
- Courts and limitation. Contract claims generally have a six-year limitation period; tort claims are usually three years for personal injury and six years for other damage. Litigation, mediation and arbitration are alternatives to the ombudsman route.
Worked example
A shopkeeper's stock is damaged by a leak. The insurer pays £50,000 but later discovers the insured deliberately inflated the stock figure by £15,000. The insured's claim is fraudulent. The insurer may refuse the entire claim, recover the £50,000 already paid, and terminate the policy for the future. It does not have to pay the honest £35,000 core of the claim, because the fraud taints the claim as presented. If the insurer had merely delayed payment unreasonably after agreeing the loss, the insured might have a separate damages claim for late payment.
Traps
Do not assume every breach of a claims condition defeats the claim; check the wording. Do not call ordinary exaggeration fraud without dishonesty. Do not confuse the FOS award limit with the policy limit. Do not send every dispute to the FSCS. Do not forget limitation dates when advising on litigation.