Don't get pranged by the policy shunt >By Josephine Cumbo >Published: June 24 2005 15:33 | Last updated: June 24 2005 15:33 >>
Motorists who don't check the small print of their insurance policies could be in for a nasty shock as insurers take away key elements of their cover, potentially leaving them unwittingly uninsured.
The government's clampdown on uninsured driving is prompting insurers to withdraw a long-standing extension, which allows third-party policyholders to drive vehicles they don't own.
This occurs as insurers also eliminate the 14-day "grace" period from policies, also prompted by concerns over uninsured driving.
However, a quirk of the new insurance regulation could mean that these changes will be overlooked by thousands of motorists.
Norwich Union Direct, which insures one in seven cars in the UK, has become the latest insurer to withdraw its Driving Other Cars extension. Its competitors are expected to follow suit as the government acts on the recommendations of an independent report into un-insured driving, said to add £30 per year to the premiums of honest motorists.
Norwich says the Driving Other Cars extension is contributing to the problem of uninsured drivers as the cover is often unintentionally misused.
The extension is only intended to apply to emergency situations, but some younger motorists were using it to drive more powerful cars belonging to their friends, says Norwich.
This week, the AA said it would consider the issue with the panel of
22 insurers for which it brokers.Norwich says it is communicating this change, which it has described as key, through letters to existing policyholders.
However, one Norwich Union Direct policyholder has accused the insurer of "burying the bad news" in >a 13-page booklet which came with her renewal proposal.
Peta Rogers of Horsham says she was astounded that Norwich had placed this vital information about her policy after a lengthier section on changes to courtesy cars and hire cars.
"It seems to me that an office of your size and standing should have the courage to risk the loss of business that may ensue from spelling out in clear and simple terms what you have done," Rogers wrote in a letter to Norwich.
"Now that small print is not allowed, please don't just bury bad news in mountains of verbiage. The consequences, to me and others involved, of finding myself underinsured after a serious accident are just too awful to contemplate."
Norwich strongly denies that it tried to bury bad news. It said it had a raft of changes to its policies, including arrangements for courtesy car and legal cover, to communicate to its thousands of policyholders.
"We can't possibly know what is more important to some customers and not others," says Liz Kennett, a senior official with Norwich.
"We highlighted in the renewal letter that there had been changes to the policy and that is why you need to read the booklet which was titled 'Important Notice to Policyholders'.
"I don't see how much more we can possibly do," she adds.
Consumer groups say Rogers' case highlights a quirk of general insurance regulation, which allows companies to treat new policies and renewals differently in terms of the small print in their documents.
The Financial Services Authority, which began regulating the sector in January, requires those selling new cover to provide user-friendly policy summaries which carry the Key Facts brand.
Documents with the Key Facts logo are supposed to help the consumer buy the right cover by listing salient points about the policy in a brief format, reducing the risk of significant exclusions or limitations being overlooked.
But this demand of "less is more" was dropped for renewals, due to industry pressure. For the thousands of policyholders renewing each year, their insurers are only required to send them a statement setting out changes to their cover from the previous year. As in the case of Rogers, the small print in these statements can run to a dozen pages.
"One of the dangers is that with such long documents (such as that Rogers' received), you may miss something which is pertinent to you," says Mike Naylor, principal researcher with Which?, the consumer rights group.
"Many consumers think they have better protection under regulation, but the onus is still on them to check their policy."
The Financial Services Consumer Panel, the independent voice for consumers of financial services, this week said Rogers' case added to their concerns, already raised with the FSA, about the fair treatment of customers.
Some within the industry agree that more needs to be done to alert consumers to current and future changes affecting their policies. This is a particular issue since general insurance products can be sold without advice.
"Whether they have cover for driving other cars is not something people always ask when they buy a policy," says Graeme Trudgill of the British Insurance Brokers Association.
"But if they are buying without advice, for example directly over the internet, they need to check if they have this cover. Otherwise they could find themselves driving uninsured and that is a very serious offence."
Trudgill says this case also highlights the need for policyholders to check for other significant exclusions. He says some think they are covered for driving in Europe when they are not, or often don't know their policy does not cover their commute to and from work.
The FSA says the Key Facts concept is essential to helping consumers get a fair deal and is scrutinising the industry for poor examples of policy summaries.
However, some are not convinced that even this >will prevent consumers missing important changes to their policies, such as the removal of driving other cars cover.
"Until companies are more upfront about what's in their policies, the only way you can be sure whether the product you are buying is suitable is to read the full policy document," says Naylor.
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