ATE Blog
Claims on After the Event Insurance Policies
14th March, 2011
Oh my word. We made a claim once on our household insurance policy.
We had a leak from a bathroom on the top floor of our house and it ran down the back of the walls and across ceilings down two floors. Fortunately, we managed to isolate the problem quite early on - a leaking pipe behind a wall - but the effect was we needed to redecorate two and a half rooms.
Well that's what we pay our contents insurance for isn't it? Well yes but boy, did they make us work for the money. We obviously needed an estimate which we obtained but the insurer had a 'scale' showing what the charge should be based on the square footage involved. Didn't matter we were in London of course or that the ceiling had old coving around it etc - they just weren't paying. So we had to get another quote and another! After the third one, they offered a payment which was still below any of the quotes so I had to negotiate with the decorating company. Eventually, 4 months later, it all got sorted. We had to pay an excess of course of £250, so not a great experience.
I had forgotten all about this until the new contents quote came for this year. Guess what, it had shot up 25% because we had made a claim.
So basically, we pay a premium each year then have to do a lot of arguing to get some of a small claim paid, and then pay more the next year for the privilege. It is the same for all insurance in the industry - except After the Event insurance.
With ATE insurance, there is so much competition, and few claimants make more than one claim, that the premiums are generally fixed very low. If a claim is lost then the insurer can't afford to put the premiums up for everyone else as they will lose business and there aren't annual premiums. The only way insurers regulate things is by having clauses in their insurance contracts which get them out of trouble in the event that the client's claim wasn't as good as first thought. These are called 'prospects' clauses.
The clauses say, that cover only continues provided that prospects of success exceed x%. Often 'x' is 60% but it can be higher. Clever isn't it? How can anyone (even a learned QC) say what the prospects of a case are? It is purely guesswork, and so here is the nub of the problem for clients. After the Event insurers can effectively use this clause to deny payment of claims. If a case is lost, all they need do is point to the clause and say 'Prospects weren't over 60%' and refuse payment. How can a claimant prove that prospects were over 60% - they lost lost the case so it couldn't have been that high?
It is a minefield for claimants and totally unfair, which is why we don't have a prospects clause in our policies. Our policies allow the solicitor to decide if a claim should proceed. After all, they are best placed to make that decision and their money is on the line (they don't get paid under a CFA if they lose).
So be careful who you insure with. It is not all about price - check the small print for the 'get out of jail free' cards held by the underwriter. They shouldn't be allowed to chose which claims to pay or how much - i.e. they shouldn't be allowed to behave like a household insurance company.
Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk | daniel@boxlegal.co.uk | 0870 766 9997
We had a leak from a bathroom on the top floor of our house and it ran down the back of the walls and across ceilings down two floors. Fortunately, we managed to isolate the problem quite early on - a leaking pipe behind a wall - but the effect was we needed to redecorate two and a half rooms.
Well that's what we pay our contents insurance for isn't it? Well yes but boy, did they make us work for the money. We obviously needed an estimate which we obtained but the insurer had a 'scale' showing what the charge should be based on the square footage involved. Didn't matter we were in London of course or that the ceiling had old coving around it etc - they just weren't paying. So we had to get another quote and another! After the third one, they offered a payment which was still below any of the quotes so I had to negotiate with the decorating company. Eventually, 4 months later, it all got sorted. We had to pay an excess of course of £250, so not a great experience.
I had forgotten all about this until the new contents quote came for this year. Guess what, it had shot up 25% because we had made a claim.
So basically, we pay a premium each year then have to do a lot of arguing to get some of a small claim paid, and then pay more the next year for the privilege. It is the same for all insurance in the industry - except After the Event insurance.
With ATE insurance, there is so much competition, and few claimants make more than one claim, that the premiums are generally fixed very low. If a claim is lost then the insurer can't afford to put the premiums up for everyone else as they will lose business and there aren't annual premiums. The only way insurers regulate things is by having clauses in their insurance contracts which get them out of trouble in the event that the client's claim wasn't as good as first thought. These are called 'prospects' clauses.
The clauses say, that cover only continues provided that prospects of success exceed x%. Often 'x' is 60% but it can be higher. Clever isn't it? How can anyone (even a learned QC) say what the prospects of a case are? It is purely guesswork, and so here is the nub of the problem for clients. After the Event insurers can effectively use this clause to deny payment of claims. If a case is lost, all they need do is point to the clause and say 'Prospects weren't over 60%' and refuse payment. How can a claimant prove that prospects were over 60% - they lost lost the case so it couldn't have been that high?
It is a minefield for claimants and totally unfair, which is why we don't have a prospects clause in our policies. Our policies allow the solicitor to decide if a claim should proceed. After all, they are best placed to make that decision and their money is on the line (they don't get paid under a CFA if they lose).
So be careful who you insure with. It is not all about price - check the small print for the 'get out of jail free' cards held by the underwriter. They shouldn't be allowed to chose which claims to pay or how much - i.e. they shouldn't be allowed to behave like a household insurance company.
Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk | daniel@boxlegal.co.uk | 0870 766 9997
