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Why insurers decline claims

Why insurers decline claims

By John Grant

Many people hold a belief that insurers are there to find ways not to pay claims. My experience of the industry does not support this. In most cases and with most companies, they are more likely to be trying to find a way to pay the claim.

What seems to create the belief that insurers want to avoid paying are the unexpected reductions on the payout one is expecting to receive. In the few cases where claims are declined, it is usually due to misunderstandings of what is covered under a policy.

This could be for, say, rectification of a leaky pipe in the house where the insurance will cover the repairs from the resulting water damage but not for the repairs to the pipe. The leak has probably caused minimal collateral damage, but the pipe repairs and re-plumbing work can be very expensive. Another reason for claims being declined is where a renewal offer has been made but the premium has not been paid. A loss occurs, and then the renewal payment and claim form arrive at the insurer virtually together.

In such cases an insurer will usually try and ascertain what the prior intention was regarding renewal of the policy. They will quite often allow a few days grace - especially for house policies where a mortgagee is noted as cover must continue until the mortgagee has been given time to make the payment on behalf of the insured.

Declining claims for other reasons, such as a breach of policy conditions is not overly common.

Insurers have many fraud checking processes and if any of these show 'red flags' then you can expect to have the claim very thoroughly scrutinised. Fraud red-flags can happen for repetitive type claims, misstatements or exaggerations on items being claimed.

If you find your claim getting the third degree then the best advice as always is full co-operation and transparency.

If all this fails and you find the claim declined then use the company's dispute process.

If that also fails (and as long as the claim doesn't involve commercial insurance or savings scheme such as superannuation), and your claim is less than $100,000 then you can complain to the Insurance and Savings Ombudsman for a resolution. You can find details at their web site here. If you have had an insurance claim denied, we would like to hear of your experience.


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