Insurance can be bought in minutes. A few questions, a comparison site, expensive advertising and a monthly premium can make protection feel simple. The experience can look very different when a substantial claim is actually made.

That is when the promise behind the policy is tested. Loss adjusters, surveyors, expert reports, exclusions, requests for documents, disputed valuations and long periods of waiting can replace the simplicity of the sales journey.

For a policyholder facing a rejected insurance claim, an underpaid settlement or an insurance claim that is taking too long, the important question is not simply whether the insurer's position sounds reasonable. It is whether that position properly reflects the policy, the evidence and the loss that has actually occurred.

Insurance is easy to buy. Claims are where the promise is tested.

Insurance marketing understandably focuses on reassurance: protect your home, protect your business, protect the things that matter and be prepared for the unexpected.

Television advertising, sponsored search results, comparison-site promotions and increasingly streamlined online journeys are designed to make buying insurance straightforward. Enter a few details, choose the cover, provide payment information and a policy can often be in place within minutes.

There is nothing inherently wrong with that. But the product being purchased is ultimately a promise. If a defined insured event occurs and the policy responds, the insurer is expected to deal with the resulting loss in accordance with the policy and applicable claims-handling rules.

That promise may not really be tested for years.

When it eventually is, the policyholder can discover that determining what the insurer should pay is considerably more complicated than buying the policy ever was.

Was the event insured? Does an exclusion apply? What caused the damage? How much will repairs actually cost? Has all of the damage been accepted? Is the insurer alleging underinsurance? Is repair adequate or is replacement required?

When an insurance claim goes wrong, “fair” is not enough

When a claim is rejected, reduced or delayed, the conversation can become surprisingly narrow.

The insurer makes an offer. Rejects part of the claim. Relies upon an exclusion. Produces a surveyor's report. Questions the cause of the damage. Or simply takes months to reach a decision.

At that point many policyholders understandably begin asking whether the insurer's position is fair.

But there may be a better question:

There can be a considerable difference between an outcome which appears reasonable on the surface and one which properly reflects what the policyholder may actually be entitled to receive.

For someone dealing with a rejected, underpaid or disputed insurance claim, that difference can be worth thousands of pounds — and in substantial property or commercial claims, potentially considerably more.

A fair outcome starts with the insurance policy

An insurance claim is not simply a negotiation over what an insurer feels comfortable paying.

There is a contract.

The policy wording establishes what has been insured, when cover applies, the extent of that cover and the exclusions and conditions upon which an insurer may rely.

So when considering whether an outcome is fair, the starting point should normally be the policy itself.

• Has the insurer interpreted the wording correctly?
• Does the exclusion being relied upon actually apply to the circumstances of the claim?
• Has all relevant cover been considered?
• Have policy limits, excesses, depreciation or deductions been applied correctly?
• Has the insurer properly established the facts upon which its decision depends?

These questions are particularly important where a claim has been rejected outright.

A professionally written rejection letter can appear definitive. It may quote policy conditions, refer to expert reports and use technical language.

That does not automatically mean the conclusion is beyond challenge. The important question is whether the insurer's reasoning actually stands up against the policy wording and the evidence.

An insurer's offer is not necessarily the value of your claim

Underpayment can be harder for a policyholder to recognise than outright rejection.

If an insurer refuses a claim, the dispute is obvious.

If it accepts the claim but offers £30,000, £50,000 or £100,000, the existence of a substantial number can create an assumption that somebody has objectively calculated the correct amount.

That should not always be assumed.

There can be disagreement over:

• the extent of insured damage;
• repair versus replacement;
• reinstatement costs and building specifications;
• depreciation and underinsurance;
• alternative accommodation and professional fees;
• business interruption and consequential losses;
• the cause of the damage; and
• whether particular losses arose from the insured event.

The insurer may have one scope of works. The policyholder's contractor may have another. A loss adjuster may reach one valuation. An independent specialist may reach a materially different one.

The size of the settlement should therefore not be judged simply by whether the number sounds substantial or reasonable.

It should be compared with the actual insured loss and the cover that was purchased.

Has the insurer offered less than you expected?

If your claim has been rejected, reduced or settled at a figure you do not understand, send IDS the insurer's latest decision, your policy and the documents you already have.

We can carry out an initial review before you decide what to do next.

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Initial review free. Any further paid work would be explained and agreed separately.

The insurer has experience. Most policyholders do not.

Insurers deal with claims every day. They have established processes and may have access to claims handlers, loss adjusters, surveyors, engineers, forensic accountants and lawyers.

A homeowner or business owner may be dealing with a significant insurance claim for the first time.

That difference in experience can matter.

If an insurer produces a technical report saying that damage was caused by wear and tear rather than an insured event, the policyholder may assume there is little point arguing.

If a loss adjuster says a particular figure is sufficient to reinstate a property, the policyholder may assume that is the definitive valuation.

If an insurer cites an exclusion, the policyholder may assume the claim is finished.

But expert conclusions can be challenged. Assumptions can be questioned. Policy wording can be interpreted differently. Evidence can be incomplete. Suitably qualified experts can reach different conclusions from the same circumstances.

Delay can change everything

A fair insurance outcome is not only about the amount eventually paid.

Time can matter enormously.

A homeowner may be unable to use part of a property. A family may be living in temporary accommodation. A business may be losing revenue. Damage may worsen. Contractor prices may change. A policyholder may have to meet expenses personally while waiting for decisions.

Documents may be requested repeatedly. Different handlers may become involved. Further expert reports may be commissioned. Weeks become months.

A claim which might originally have been manageable can become considerably more damaging because of the time taken to resolve it.

The FCA's insurance claims-handling rules require insurers to handle claims promptly and fairly, provide reasonable guidance, not unreasonably reject a claim and settle promptly once settlement terms are agreed. ^[1]

“Fair and reasonable” does not necessarily answer every question

Policyholders may also encounter the expression “fair and reasonable” when considering the Financial Ombudsman Service.

The Ombudsman can be an appropriate and valuable dispute-resolution route in many cases.

Its statutory approach, however, is not simply to reproduce what a court would decide by applying legal rules alone.

The FCA rules require the Ombudsman to determine a complaint by reference to what it considers fair and reasonable in all the circumstances, taking account of relevant law and regulations, regulator rules, guidance and standards, codes of practice and, where appropriate, good industry practice. ^[2]

The Financial Ombudsman Service itself explains that its decision on what is fair and reasonable may be different from what a court would decide when applying legal rules. ^[3]

That is not a criticism of the Ombudsman. It is an important distinction.

An Ombudsman outcome should not automatically be treated as another way of saying that every possible question concerning the policyholder's contractual or legal entitlement has been determined exactly as a court would determine it.

Nor does it mean that going to the Ombudsman must automatically be the best first route for every insurance dispute.

Depending on the claim, the stronger route may first involve a properly evidenced challenge to the insurer, further expert evidence, negotiation or, in suitable cases, consideration of litigation.

What does a genuinely fair insurance outcome look like?

The policy

What protection was actually purchased? What do the relevant terms mean? Which exclusions, conditions, limits and excesses genuinely apply?

The evidence

What happened? What caused the loss? What damage or financial loss resulted? What do the photographs, reports, invoices, valuations and expert evidence show?

The value

What will it genuinely cost to repair, replace, reinstate or compensate for the insured loss? Has every relevant element of the claim been recognised?

The route to resolution

What is the strongest way of challenging the insurer's position?

Further representations, additional evidence, negotiation, a formal complaint, the Ombudsman or litigation should be considered in the context of the individual claim rather than selected automatically.

Before accepting the insurer's position, understand your own

This is where many policyholders find themselves at a considerable disadvantage.

They know the insurer's position.

They have the rejection letter. They know the amount it is willing to pay. They may have the insurer's surveyor's report.

What they often do not have is a clear independent understanding of their own position.

Without that, important decisions can be made in the dark.

A policyholder might accept an inadequate settlement because they do not realise there is evidence supporting a higher claim. Another may spend months pursuing the weakest part of their argument. Someone else may enter a complaints process before gathering evidence which could materially strengthen the claim.

Others assume that because an insurer describes something as its “final decision”, there is little more that can be done.

That is not always the case.

The real promise behind insurance

Insurance advertising can sell confidence in seconds.

But when a home suffers subsidence, a major escape of water occurs, a property is damaged by fire or a business suffers a substantial insured loss, the glossy advertising no longer matters very much.

The policyholder does not need a slogan.

They need the policy to respond properly. They need the loss assessed correctly. They need the evidence considered fairly. They need decisions made without unnecessary delay. And where the insurer's position is wrong, incomplete or inadequate, they need to understand how it can be challenged.

That is when the real value of the insurance policy becomes clear.

How Insurance Dispute Service can help

Insurance Dispute Service helps policyholders understand where they really stand when an insurance claim has been rejected, underpaid, delayed or disputed.

We look beyond the headline decision.

We examine the insurer's reasoning, the relevant policy wording, the evidence available, the value of the claim and the issues which may need to be challenged.

Most importantly, we consider the possible routes towards resolution.

Because obtaining a fair insurance outcome should not simply mean accepting what an insurer says is reasonable.

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Frequently asked questions

Sources and further reading

1. FCA Handbook — ICOBS 8.1: Insurers: general
2. FCA Handbook — DISP 3.6: Determination by the Ombudsman
3. Financial Ombudsman Service — How we make decisions

This article provides general information about insurance disputes and does not constitute legal advice. The appropriate route depends on the policy wording, evidence, value, relevant time limits and circumstances of the individual claim.