Why insurance claims are 'withdrawn' - dishonesty, bullying insurers, say Kiwis

Wednesday, 6 November 2019

Stuff readers provide reasons why one in five insurance claims is 'withdrawn' by the policyholder.

OPINION: Tower chief executive Richard Harding put the cat among the pigeons at the Insurance Council conference by revealing around one in five claims were 'withdrawn' by policyholders.

This, Harding said, gave lie to the happy boast of house and car insurers that they paid 99.9 per cent of claims, and he told industry peers insurers' own research showed 'confidence in our industry is at an all-time low'.

The revelation polarised the opinion of Stuff readers, with many venting their distrust of insurers, and a smaller proportion jumping to the defence of the industry, including insurance brokers and people who work in insurance.

Their experiences give some insights into some of the reasons why so many house, car and contents insurance claims are withdrawn.

**READ MORE:

Some customers feel insurers bully policyholders into deciding it's easier not to make a claim.

* Insurers don't really pay 99.9 per cent of claims

* Finance minister warns insurers not to leave New Zealanders without cover

* Why people say insurers have no compassion

* First his home burnt, then businessman Evan Christian had to fight his insurer

* $1.3 million deck disaster leads to financial ruin

* The unfair business of utmost good faith in insurance**

BULLYING, FEAR

Some readers felt insurers had all the power, and they can effectively bully policyholders into deciding it is easier not to make a claim.

'Here's a clue as to why they are withdrawn,' one reader wrote. 'Recently tried to make a claim after a burglary at a bach. I was told that if the claim was not accepted I could have an increase in my premiums.

'After going through a cross examination by the insurance company which increasingly seemed to imply it was our fault and we were making it up I gave up and withdrew the claim.'

DISHONESTY & IGNORANCE

Other readers felt no-one with a real claim would withdraw it, and blamed dishonest and ignorant policyholders for the high levels of claims withdrawals.

Harding said 99 per cent of people were honest, 'legitimate' customers, but that was not the experience of one reader said: 'It's amazing how one-eyed people are, after working for an insurance company I can tell you most claims are withdrawn because the insured has been caught trying to scam the company or claim for what is not not claimable.'

Some readers blamed policyholders for not having read their policies, not knowing what they were covered for, and making claims that could never succeed.

Some people felt no-one with a real claim would withdraw it.

'I've never had a problem with insurance companies,' said one reader. 'I think people tend to have problems because they don't take the time to either speak with an insurance broker or read the policy document to understand when they won't be covered.'

Harding was more forgiving of ignorance, admitting: 'We incorporate complex jargon into our policies that even lawyers struggle to understand.'

And, he said: 'Customers should care about every aspect of their insurance, but we've conditioned them to think it's all too hard.'

NON-DISCLOSURE

Richard Harding chief executive of Tower said the high level of claims being withdrawn contributed to distrust of insurers.

Harding referred to non-disclosure in his speech. This is when a policyholder fails to tell an insurer something they needed to known, even if the insurer did not ask them about it.

This, readers realise, could happen either innocently, or because a person was trying to deceive an insurer, such as by not telling an insurer about previous driving convictions.

'The Tower CEO hit the nail on the head when he said their policies and processes are designed to catch the 1 per cent who are dishonest, not the 99 per cent who are honest', said one reader. Some customers do not disclose they were already diagnosed before they got the policy, or they already had symptoms they did not disclose. I think in cases like this it's fair enough for insurance companies to ask for proof, but it does add more stress to the genuine cases.'

Insurers have been told by the government to expect a change to the laws governing non-disclosure, which could mean insurers could only rely on non-disclosure in relation to information they had asked for.

It's a topic the Insurance Ombudsman has lobbied on for years, and some readers agree.

'What right do insurers have to decline a claim because the client did not disclose information that the insurer did not ask for,' asked one.

THEY DON'T HAVE A BROKER

Brokers sell insurance, and advise their clients.

People with brokers to explain their policies should be better informed, and make fewer pointless claims.

Brokers also support their clients when making claims.

'Use a broker! Get them to explain the hard stuff and they can argue on your behalf. Ok, I am a broker, but in 22 months haven't had a single client with a declined or withdrawn claim,' said one reader.

EXCESS TOO HIGH

Some people, it seems, make claims without realising their excess was higher than the amount they would have claimed.

'My car was involved in a no-fault vehicle collision a while ago. The insurer's attitude was that 'no fault' meant 'no payment' and if I even tried to claim it would affect my no-claims bonus without giving me a cent,' said one reader.

'I didn't proceed with the claim and the next premium still went up 25 per cent anyway.'

Excesses can be very high especially for younger drivers.