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Why your claims history could lead to insurance refusal

This article will help you understand how your past insurance claims can affect your future insurance coverage.

insurance claims and being refused insurance

Navigating home insurance is probably quite low down on most people’s list of favourite pastimes, largely due to the nature of insurance itself. It’s a subject that is often associated with complexities, financial terminology and complicated processes.

However, even a basic understanding of how insurance works can prove invaluable, particularly when facing the potential hurdle of being refused home insurance coverage.

With insurance companies in the UK now paying out more money than ever for claims, particularly those related to weather damage, insurers are becoming increasingly cautious about their policies.

This article will help you understand how your past insurance claims can affect your future insurance coverage. We’ll explore why this knowledge can help you avoid being refused in the future and might even save you money.

Connecting the Dots Between Claims & Insurance Refusal

While understanding the specific reasons behind insurance refusals is essential, it’s equally important to grasp the claim process itself. Each step in this process not only helps you get the compensation you might need but also plays a critical role in shaping your insurer’s future decisions about coverage. This relationship between your claims and potential refusals is central to managing your insurance policy effectively. We’ll come back to that in a moment.

First, let’s take a closer look at the claims process to better understand its impact on your insurance status.

Understanding Insurance Claims

First, let’s explore what actually happens when you make an insurance claim.
In its most basic form, making a claim initiates a process in which your insurance company assesses and processes your request for coverage due to an event.
That event can be anything your policy specifically covers, more commonly a loss or damage to personal items, or damage to your home from theft, water, or fire.

The Claims Process Explained

Here’s a straightforward look at the key steps involved in making a claim:

  • Notification: You start by notifying your insurer about the incident, providing all necessary details.
  • Assessment: The insurance company then evaluates your claim to verify its validity and the extent of the damage, ensuring it matches what your policy covers
  • Adjustment: An adjuster may be sent to your property to assess the situation in detail, determining the extent of the insurer’s liability.
  • Resolution: The insurer concludes the process by either approving the claim and deciding the pay-out amount or denying the claim if the damage or loss isn’t covered under your policy.

Why Careful Claiming Matters

Now that we’ve taken a very brief look at how insurance claims work, the key takeaway is that insurers will track and record each incident and claim you make. And, if they are above a certain frequency, you could be marked as a high-risk policyholder. Given the recent trend in insurance claims payouts in the UK, it’s crucial to weigh not just the immediate benefits of compensation, but also the long-term consequences of making a claim.

Statistics Speak Volumes

According to the Association of British Insurers (ABI), in 2023, insurance companies paid out a huge £4.86 billion for both home and business claims. Over half of this amount—£2.55 billion—was for home insurance claims alone.A big part of this spending—10%—was due to more claims for weather-related damages like storms and floods. In fact, the money paid for these weather-related claims was £573 million, the highest amount ever and 36% more than in 2022, which was £421 million. Other types of claims also saw increases:

  • Claims for theft went up by 15%.
  • Claims for water damage not related to weather went up by 20%.
  • Claims for accidental damages increased by 11%.

With these rising numbers, insurance companies are becoming more careful about whom they cover. They look more closely at the history of claims a homeowner has made when deciding whether to offer insurance.

refused, denied or cancelled insurance
2023 saw record-high insurance claim payouts

Evaluating Whether to Claim

Strategic Claiming

Back to our in-depth look into insurance claims. Deciding whether to file a claim should involve a careful assessment of long-term consequences versus immediate needs. It’s crucial to weigh the cost of the excess and the potential for premium increases against the cost of the damage. For significant damages, such as a tree falling on your house, filing a claim clearly justifies the use of insurance – and rightly so. However, for minor repairs, it’s worth taking a moment to consider the implications more carefully.Handling smaller repairs yourself can be much more economical in the long run. By not claiming for every small issue, you can avoid future hikes in your insurance rates and maintain a favourable risk profile with your insurance company. It’s all about making smart choices that ensure insurance is there for you when you really need it, without unnecessarily increasing your costs or risk of refusal. Inevitably, the more claims you make, the more your premiums will increase, and the higher the chances are of being refused insurance.

For example, consider a scenario where a leak in your bathroom costs £400 to repair and your excess is £250. If claiming leads to a 15% increase on your £1,200 annual premium, the immediate financial benefit of claiming might seem worthwhile.

However, it’s crucial to understand that the impact of this claim could extend beyond just the next renewal. Insurance premiums could potentially include a 15% claims loading for the first two years, reducing to 10% in the third year, and 5% in the fourth and fifth years.

Over time, the cumulative cost of these premium increases could significantly outweigh the initial savings from claiming.

Key Tip: Through running the numbers, you can evaluate your potential costs. In some cases, you’ll find you’re better off covering minor incidents yourself as opposed to putting in a claim.

Conclusion

Understanding the impact of your claims on future insurance applications is undeniably beneficial. Remember, insurance is there to protect your home against significant damage or losses. Claiming for every minor incident may not only cost you more in the long run, but it could also increase the risk of being refused insurance in the future.

If you’ve faced challenges securing insurance due to a previous refusal or a complex claims history, Intelligent Insurance is here to help. We specialise in providing coverage tailored to those who have been previously refused or have extensive claims records. Explore our solutions on our Refused Insurance page or our Insurance with Claims History page for more details. Alternatively, you can chat with us directly to see how we can help you secure the right protection for your home.

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