The price comparison website culture worries me. There are so many words of wisdom relating to buying cheap: “Pay now, or you’ll pay later.” “You get what you pay for.” “Quality rarely comes cheap but is worth the extra in the long run.” Yet so many people who use these websites go chasing the cheapest possible insurance premiums without thinking of the potential consequences. I was reading recently how two people on the same road in St Asaph were treated very differently by their insurance companies after being affected by flooding. In November last year, heavy rains hit the whole of the South West. Paul lived at No 7 and Shirley lived at no 11 of the same road.
Paul, his wife and two children woke up to find their living room, kitchen and dining room completely flooded. Getting his family out of the house as quickly as possible, Paul returned in his wellies and stood in his living room contemplating the damage in disbelief. There was knee deep, muddy flood water everywhere. The damage was considerable and so was the smell. Skirting boards and carpets were all completely ruined and in the kitchen, the flood water had destroyed most of the kitchen units. The wooden floor had come away from the foundations and water had penetrated all the electrical sockets. Thankfully, there was a power cut, so at least Paul wasn’t in danger of getting electrocuted.
Earlier in the year, Paul had chosen his insurance company based on a recommendation from his parents who had been treated well by the insurer after they had been burgled. Upon calling them to discuss his troubles, they were courteous and sympathetic and immediately booked Paul and his family into a hotel that was convenient for them in terms of travel to and from work and for schooling. They sent a loss adjuster in as soon as the flood waters had subsided and within a week, a team of builders were in working to get his home back to its best. Paul felt like they really cared about him and his family and they pulled out all the stops to make them feel as comfortable as possible given the circumstances.
Shirley had a rather different experience, having selected the cheapest buildings insurance policy through one of the price comparison websites. Although her disaster was almost identical to Paul and his family’s, Shirley’s insurance company immediately went on the defensive when she contacted them. Because she had not clearly stated that she lived in a flood risk area on the original application form, her insurance policy was null and void and they would not be honouring her claim. The best they could do was to offer her a refund of her premiums! Shirley argued that she had not known that the property was in a flood risk area – in fact, prior to this incident, there had never been any history of flooding on their road. She was however referred to the Environment Agency website, where a map of England and Wales showed her area to be in the “blue zone” or “at risk of flooding”.
Shocked to the core, Shirley maintained quite rightly that the insurance company should have made its own checks and made it clear at the time of application that she was in a flood risk area and may not be covered. Sadly, she was referred to paragraph two of section F of the terms and conditions which said that it was up to the applicant to research such things as subsidence and flood risk and to declare them. Case closed.
Insurance companies make millions of pounds in profits every year. In Paul’s case, the insurance company was more concerned about its reputation than in paying out a claim – which would have been a mere blip on its balance sheet. Sadly, Shirley’s insurance company’s mission statement was more about rejecting consumer claims than in enhancing its reputation.
Pay now or you’ll pay later. The principle runs true for all types of insurance be it car, life insurance, critical illness cover or buildings and contents. Quality never comes cheap and for something as important as insurance, it is well worth paying extra for. Don’t get caught out by the price comparison site culture. Use a financial adviser or insurance broker instead.