The Instruction to Find a Way to Decline
Sinéad is a claims handler at a small Irish insurer. A policyholder, Mrs O’Donnell (78), has a subsidence claim for €48,000. The policy is a consumer home policy and requires notification “as soon as practicable”. Mrs O’Donnell notified 11 months after she first noticed cracks. She explains that her husband died in that period and she was in hospital; she has mild cognitive impairment and no family support. The insurer’s engineer confirms the damage is covered. The claims manager instructs Sinéad to “find a way to decline” because the insurer is under pressure to hit a loss ratio target. Sinéad also notes that the file contains no evidence that the delay prejudiced the insurer’s ability to investigate.
1. Identify the ethical issues in the manager’s instruction and Sinéad’s conflicting duties.
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The manager’s instruction is ethically improper. It asks Sinéad to search for a technical reason to decline a claim that the engineer has confirmed is covered, in order to meet a loss ratio target. That conflicts with honesty, integrity and fair treatment of the customer.
Sinéad’s duties are not only to her employer. She owes a duty to the policyholder to handle the claim fairly and in good faith, and a duty to the insurer to protect its legitimate interests. Those duties can be reconciled: the insurer is entitled to investigate delay, but it must not manufacture a defence or misuse a genuine condition.
Mrs O’Donnell is also a vulnerable customer. Bereavement, hospital treatment, mild cognitive impairment and lack of family support increase the risk that she will not understand the process or assert her rights. Treating her fairly requires extra care, clear communication and consideration of her circumstances. Sinéad should not hide behind the delay. She should record the instruction, explain why it is wrong and escalate the matter if necessary.
2. Explain the regulatory and conduct requirements that apply to the claims decision, including the treatment of vulnerable customers and the effect of the Consumer Insurance Contracts Act 2019 on late notification.
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The insurer must handle the claim promptly, fairly and transparently. It must investigate the facts, tell the customer what is happening, give clear reasons for any decision and allow the customer to respond. A vulnerable customer should receive additional support so that she can understand and participate in the process.
Late notification is a breach of a policy term, but the 2019 Act limits the insurer’s ability to rely on it. In a consumer contract, a breach of a term does not entitle the insurer to refuse the claim unless the breach is material to the risk and the loss is connected with the breach. Here the delay did not cause the subsidence and the file shows no prejudice to the investigation. The insurer can still ask questions about the delay, but it cannot use it as a mechanical defence.
The manager’s loss ratio target is irrelevant to the merits. Using it to drive a coverage decision is a conduct risk and may breach the Consumer Protection Code’s requirements on fairness and the customer’s interests. Sinéad should also consider her fitness and propriety obligations: she must act with integrity and not misrepresent the file.
3. Recommend a defensible course of action, including how Sinéad should handle the instruction and what should be documented.
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Sinéad should not follow the instruction to find a way to decline. She should reply to the manager in writing, explaining that the engineer has confirmed cover, that the delay caused no prejudice and that the 2019 Act prevents refusal unless the breach is material and connected with the loss. She should ask the manager to confirm the instruction in writing and escalate the matter to the compliance function or a more senior manager if the pressure continues.
She should document:
- The manager’s instruction and her response.
- The engineer’s findings and the evidence of no prejudice.
- Mrs O’Donnell’s vulnerability and the support offered.
- The legal and regulatory basis for paying the claim.
- The claim calculation and any deduction for policy excess.
The insurer should pay the €48,000 claim, subject to the excess, and consider a goodwill payment for delay or distress. It should write a clear decision letter in plain language and offer a named contact. If the manager persists, Sinéad should use the firm’s whistleblowing or breach-reporting channel. This protects Mrs O’Donnell, the insurer’s reputation and Sinéad’s own professional standing.