Reduce the cost of your insurance claims

Keep the cost of your policies down when you've had to make car or household insurance claims, regardless of who was at fault.

The good insurers – the ones that don't go out of business – are obsessed with statistics. Whatever they can find out about us and prove statistically they will use to improve their price setting. If they find that, statistically, plumbers who live in Liverpool, drive a Volvo and wear knee-pads are less likely to injure someone whilst at work then they'll charge Liverpudlian Vovlo-driving knee-pad wearing plumbers less for their public liability insurance, for example.

If you think that's crazy, here's a real life example. If you paint go faster stripes on your car, some insurers will charge you a greater premium and many will refuse to insure you. Why? Because insurers have found that people who have modified cars are more likely to cost them more in claims, regardless of whether the change is merely cosmetic and doesn't improve performance. It's what they call moral hazard, as opposed to physical hazards, such as modified suspension.

I know from my time in the industry that insurers' obsessions extend into other areas too, and in ways that can be particularly painful on your wallet. Today I'm looking at the obsession of who's at fault for an accident in car insurance and home insurance, and the negative consequences of this. Then I'll tell you what you can do to mitigate the problem.

What's a fault claim?

That question is not as straightforward as you'd think. Insurers define a 'fault' car accident as any incident where they pay out and can't recover all the money. This is even if the fault was blatantly not yours and they know it's not.

What's more, if your case isn't settled when you come to renew your policy and your insurer hasn't yet recovered its costs from the other party's insurer, you'll have a fault claim at renewal. Plus, if liability for a new claim is undecided at renewal and your insurer could potentially pay out, this can be recorded as a fault claim too. If you try to take your policy elsewhere, you're obliged to point out there's a claim outstanding and other insurers will also normally consider it to be a fault claim.

Although the word 'fault' isn't particularly associated with home insurance, it works on the same principle. If it's no one's fault but the insurer has to pay something, or if it was your neighbour's fault but your insurer can't get all its money back, it'll still count as a claim on your record and it'll make future insurance more expensive.

What can you do?

If the claim was quite small it can make sense for you to pay the insurer back, if it agrees to re-record it as a non-fault claim – or to remove the claim from the record completely in the case of home insurance. Ensure you get an updated no-claims bonus letter.

Also, some claims stay open for years, as a former colleague of mine when I was a road traffic accident paralegal could attest to; she was trying to ascertain liability for a 25-vehicle motorway accident and understandably made slow progress.

If you have an old incident finally closed and marked as non-fault, you should ask all your subsequent insurers to refund you the difference between what you paid and what you should have paid, and get a letter with an updated no claims bonus.

Recent question on this topic

• toyraman asks:

  how do i find out about the home insurance providers attitude towards claims?

  • 
    madelaine answered "It's not a scientific method but I posted on a well-used general discussion board (ebay's round..."
  • Read more answers

You want to ensure that claims are dealt with as swiftly as possible to reduce the chances of this situation occurring in the first place. Having your own legal expenses insurance can help, as it gives you (or your legal representatives) a greater excuse to harass your insurers, and with greater chance of stimulating action.

Without legal expenses insurance, insurers have no obligation to recover your excess and other losses at the same time as its own. Hence, if its own losses are very small, it may find it's cheaper not to pursue recovery of them. Yet you'll still have a fault claim against you.

From my experience in the industry that isn't standard practice but it does occur; I think there's an attitude difference at some firms when they weigh that the costs of chasing their money are higher than the rewards. This is probably more likely if a claims department is overloaded with files. That's why you want all the help you can get.

Do read the small print before signing up to legal expenses insurance though. Some of the cover is often much much more basic than you'd think, especially for the legal policies linked to home insurance. Some policies are better than others.

Another thing you can do is to gather as much evidence as possible and report any incidents immediately. Keep the insurer up-to-date on any information you have, and try to keep any costs related to the incident down (which you're obliged to do anyway).

You can also try haggling with the insurer or other insurers. Sometimes they're willing to log your renewal as a non-fault claim first, but they'll have to charge you extra if they can't get all their money back. If your claim is extremely small, e.g. £10 after your excess, I've known insurers to occasionally waive that too. Be polite when talking to them.

If you're really struggling to deal with insurers, it may be worth looking to a broker. Brokers have been shown to be, on average, a lot more expensive than online comparisons. (A recent example comes from insurer the AA, which found the average online shop-around price for comprehensive car insurance is £536, but offline it's £704. If you buy offline but don't shop around the average price is even higher.) However, if you need some extra support with your claim then a knowledgeable broker may give you an edge.

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