Insurer accepted claim, but payout left policyholder feeling ripped off

Thursday, 7 November 2019

Stuff readers provide reasons why one in five insurance claims is 'withdrawn' by the policyholder.

Cherie Scott's insurance water damage claim was paid, and yet it's not made her a fan of the insurance industry.

House, car and contents insurers say they pay around 99 per cent of claims, and yet the insurance industry is still wrestling with historic low levels of trust.

Tower chief executive Richard Harding told the Insurance Council of New Zealand conference on Tuesday that part of the trust deficit was caused by the 20 per cent of claims that are 'withdrawn' by policyholders.

Cherie Scott from Tauranga had her claim aceepted by her insurer, but was disappointed by the amount she got.

But Scott's anger after her successful claim after a leak in plumbing hidden away behind tiles and Gib board at her Tauranga home, showed there can be distrust and unhappiness even among the '99 per cent'.

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

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

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

* Consumers confused by 'gradual damage'**

'Rip off,' is Scott's verdict on her successful claim.

Her anger is because though the leak, which she discovered just before Labour Weekend, requires $5200 of repairs, she got just $2200 under her Westpac insurance policy.

That was $3000, the maximum the policy covered for 'gradual damage', minus an excess of $800.

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Scott said there was no way she could have spotted the hidden leak to prevent the 'gradual damage' until it breached the wall, wet her carpet and saturated particle board flooring.

'I thought my water cylinder had broken as found my carpet soaking wet,' she said.

'I got a plumber in, and a carpet cleaner, and the source of leak was from the shower not the water cylinder.'

Like many, she only found out the details of her cover, after she made a claim.

'Apparently there was a clause in policy which I was not aware of that they pay out up to $3000 for damages, but then my excess was $800,' she said.

Westpac's policy limits cover for 'gradual' damage caused by water that accidentally leaks or overflows from any plumbed internal tank, or internal water or waste disposal pipe to $3000 (including the cost of locating the leak, but not the cost of repairing the leak).

Gradual damage limitation was not generally covered under many insurance policies, said Insurance Ombudsman Karen Stevens, but policyholders did not understand that, sparking many complaints.

Gradual damage was only one of many things people might not understand about their policies.

Stevens investigated a recent complaint from a woman who was shocked to find that while her insurer would replace her accidentally stained dining room carpet, her policy did not oblige the insurer to replace the carpet in the lounge so it matched.

Another recent case involved a man getting $1000 less from his insurer for a lost ring than he had believed it was worth.

Insurance and financial services ombudsman Karen Stevens says insurers must do more to raise theri customers' understanding of what they are cov ered for.

'People's trust is undermined because they didn't get what they thought they would,' Stevens said, calling on insurers to work harder to educate their customers.

Finance Minister Grant Robertson warned the general insurance industry the government was concerned house insurance did not become unavailable to many homeowners.

Scott remained disappointed, saying she expected her bank policy to cover an unexpected, and unforeseen event, like the leak that damaged her home.

'I told them that the idea of having home insurance is to protect oneself from this sort of unexpected accidents, and after insuring with them for 30 years, to be told they were not paying is outrageous,' she said.

'I told them they are ripping people, especially old people,' she said.

The insurance industry recognised the expectation and understanding gap was contributing to its trust deficit.

Finance minister Grant Robertson, speaking at the conference, told insurers they must do more to help their customers understand what they were covered for.

Harding said insurers must make policies easier to understand.

'We incorporate complex jargon into our policies that even some of our staff and lawyers struggle to understand,' he said.