No evidence of car service; claim declined
Ani's insurance claim was declined because she had breached the service requirement condition in her policy.
Ani's insurance claim was declined because she had breached the service requirement condition in her policy.
Ani* made a claim on her mechanical breakdown policy when her car’s transmission failed. However, her claim was declined because she had breached the service requirement condition in her policy. This condition required Ani to service the car within 5,000 km or 3 months of the start date of the policy. Despite Ani believing she had done so, she didn’t have any evidence to prove it.
She complained to the Insurance & Financial Services Ombudsman Scheme, and an IFSO Scheme case manager investigated.
The case manager asked the insurer whether it would accept any claim following a breach of the service requirement condition, and they confirmed that they wouldn’t.
This effectively meant that Ani had no cover under the policy, for the payment of any benefit, from 3 months of the start date of the policy. Despite this, the policy had renewed the following year and Ani had continued to pay premiums for cover under which she could never make a claim.
The FMA has criticised insurance products which, in its view, are poor value for customers. The case manager believed this was the case, as premiums were being paid for no possible benefit.
In making a fair and reasonable decision in the circumstances, the case manager took into consideration that the cover Ani paid for would never have been suitable for her needs.
The case manager found that the fair and reasonable outcome was for the insurer to refund the premiums Ani had paid since the date of the effective breach of the service requirement condition, 3 months of the start date of the policy.
Although this was not the outcome Ani had sought, she acknowledged that the breach of the service requirement condition meant that her claim could not be paid. She accepted that the premium refund was a fair and reasonable outcome.
Complaint partly upheld
Insurers have the right to decline a claim if conditions have been breached. However, customers should not be expected to pay premiums for cover under which they could never make a claim.
* Name has been changed