Does your home insurance define storms unfairly?

With around a third of buildings insurance claims declined, being aware of the limitations in your policy's small print can be vitally important. 

New Which? analysis has found that when it comes to the ever-growing menace of adverse weather, some insurers may be side-stepping some claims with definitions of 'floods' and 'storms' that conflict with what most customers would expect, as well as industry guidelines. 

Some of the UK's largest home insurers, such as Ageas, Aviva and AXA, are among the providers with potentially unfair definitions.

Here, we'll examine the potentially unfair ways in which some insurers are defining floods and storms. We'll also explain how to challenge an insurer if you think it's made an unreasonable decision on your claim. 

Potentially unfair definitions

Using AI techniques and expert human review, Which? examined 133 policy documents from 67 insurance firms, specifically scrutinising how each defined storms and floods.

We found that nearly a third (32%) of policy wording documents contained a definition of 'flood' that we thought was potentially unfair, and a fifth (20%) contained a potentially unfair definition of 'storm'.

With both, these conflicted with consumers' general expectations of what is covered and with industry guidance.  

Defining bad weather

Defining what makes an event a 'storm' or 'flood' isn't as straightforward as it might first seem. 

As the Met Office writes on its website, 'a storm means different things to different people', and could refer to high winds, hail, snow or rain.  

Flooding is similarly tricky, as it could have varied causes – such as a river bursting its banks or a burst mains pipe – and occur gradually or in a deluge.

How most people understand floods and storms

In a Which? survey of 1,325 UK adults with buildings insurance, over two-thirds (69%) defined a 'flood' as an event where water enters and builds up in a home regardless of speed.

Three fifths (60%) defined a storm as some combination of extreme weather conditions – such as strong winds, heavy rain, heavy snow or large hail. 

However, insurers' definitions are often narrower. For example, 17 out of 42 of the policies we identified as being potentially unfair defined 'flood' in terms of the speed at which water enters the home – with many insurers using language like 'rapidly' and 'suddenly', while others made explicit exclusions to water which enters the home gradually. 

Meanwhile, over half of policies with potentially unfair 'storm' definitions only cover damage where high winds were involved.

Potentially unfair

Drawing from guidelines from industry bodies such as Flood Re, the Association of British Insurers and others – as well as consumer expectations as revealed in our survey – we developed the following test for fairness in definitions of flood and storm in home insurance policies. We believe flood definitions to be potentially unfair if they:

exclude gradual, slow and steady entry of water into a building, e.g. by specifying that water must have entered the building 'suddenly' or 'rapidly'; or

exclude gradual, slow and steady build up of water outside the building, e.g. by specifying that water must have built up 'suddenly' or 'rapidly'; or

exclude events involving water ingress from certain external sources, e.g. from a rise in the water table, or non-natural events (such as a burst water main outside of the property.

Meanwhile, we believe storm definitions to be potentially unfair if they:

stipulate that a storm must involve any single type of weather, e.g. high winds; or

exclude weather consisting of any of rain, hail, high wind, or snow alone either explicitly or through omission by specifying only some types of weather.

Policies from some of the largest firms failed one or both of our tests when it came to their definitions. Policies with potentially unfair flood definitions were sold by three of the 10 largest underwriters by market share: Ageas, Aviva and AXA.

Four policies – from John Lewis, Nationwide and Tesco Insurance – had both storm and flood definitions that failed our test. In response, Tesco Insurance acknowledged that its wording in relation to floods could be improved.

Undefined

Over half (56%) of policies contained no definition at all for a flood, while nearly a third (32%) contained no definition for a storm. 

These make it difficult to predict how an insurer would respond to claims for damage caused by torrential rain, for example, or flooding caused by a rise in the water table.

'Consumer expectations are backed up by industry guidance'

Rocio Concha, Which? director of policy and advocacy, says: 'Storms and floods can be disastrous for homeowners, yet our research shows that claims are being rejected because insurers say a property flooded too slowly, or the wind wasn't blowing hard enough during a torrential downpour, often leaving consumers baffled.

'Consumers rightly have common-sense expectations of what should and shouldn't be covered by storm and flood damage and they're backed up on this by industry guidance.

'The Financial Conduct Authority (FCA) must use its review into claims handling to assess whether firms are complying with their obligations under the Consumer Duty, and shouldn't hesitate to take tough action against those falling short.'

The FCA is currently conducting a review into how insurers handle claims. It is expected to publish its findings later this year.

The insurers respond

When contacted for comment, a Tesco Insurance spokesperson said: 'We regularly review our policies to ensure we offer the best possible outcomes for our customers. Upon further review, we accept our wording in relation to floods could be improved. We are currently conducting an in depth review of our policy documents and will incorporate this feedback into this review.'

A spokesperson for Aviva said it strongly denied any suggestion that its policy wording is unfair, stating: 'Our policy wording aligns with the definition of flood provided by Flood Re and has been externally tested and benchmarked.' It added: 'We accept the overwhelming majority of flood claims that we receive and we believe our policies are clear, providing customers with clarity about what is and isn't covered.'

AXA also argued that its definition of flood and storm perils was fair, and in line with the advice and guidance set by independent bodies. Its spokesperson said: 'These guidelines provide the expected standard for how insurers should treat customers when they make a claim.'

A Nationwide spokesperson contended that flood or storm-related claims often weren't considered only in light of the sections of the policy dealing specifically with floods and storms, but would 'often touch on other areas of our policy which will provide cover for customers.' They said this 'comprehensive approach' meant that 'our claims pay-out rate on flooding and storms outperforms the industry average.' 

Ageas and John Lewis declined to comment.

Support our campaign

As part of the Consumer Duty, the FCA expects firms to consider the reasonable expectations of customers. 

However, we think unfair exclusions and vague (or absent) definitions are one of the problems that can lead to claims being dismissed, to the policyholder's surprise. This is one of the issues that we're calling for the FCA to address as part of our campaign.

source https://www.which.co.uk/news/article/does-your-home-insurance-define-storms-unfairly-at8wa7q2inFI