Advice & Best Practice

Insurance and financial mis-selling in the Covid-19 pandemic

Financial mis-selling is an age-old issue that is still rife among many industries such as pensions, mortgages, finance schemes and insurance

However, never is there more risk around mis-selling and, therefore, a real spike in the need for litigation services, than during and after periods of economic hardship. In 2019, it was reported by the Financial Times that between £52-53bn was put aside by the banks to fix the inordinate PPI mis-selling scandal which began during the recession in 2008. 

Much like the recession over a decade ago, the COVID-19 pandemic is putting many at risk of becoming involved in a similar story. With 8.4 million people on furlough as of the end of May and an estimated one in four employers seriously considering redundancies, it’s no surprise that a huge proportion of the country feel they have no choice but to apply for certain government relief schemes such as payment ‘holidays’ and loans. 

Many will also have discussions with insurers on ways that they can save businesses, temporarily reduce outgoings and claim help from existing policies. However, for many, COVID-19 has highlighted some worms in the woodwork for numerous policies and are leaving individuals and businesses stuck with no support.

Business insurance

This pandemic has forced many organisations to close their doors temporarily as lockdown continues, meaning no income and a huge risk of redundancies and insolvencies. 

Usually, insurance policies will cover events that could risk a business’ livelihoods, from fire damage to employee injury. However, it has been noted by many businesses, especially small businesses, certain insurers are refusing to pay out despite having a clause such as; “pay outs included in the event of a notifiable disease”. The argument being that COVID-19 is an unknown disease, therefore not ‘notifiable’.

This will, and has, left many businesses stuck between a rock and a hard place with several at the risk of having to close their doors indefinitely. 

Ensure that you challenge your insurer, keep records of all conversations and if necessary, approach a professional or the Financial Ombudsman Service for help and advice.

Car insurance 

Akin to many other financial relief schemes, the Government have implemented an MOT delay scheme allowing UK drivers to continue driving even with an expired MOT certificate. This is only in effect for those whose MOTs ran out on or after March 30th and the plan is to continue this scheme for the next six months.

While the Government has assured all drivers that their insurance will still be valid during this time, it has strongly pushed the message that all cars driven after their MOT expiry must be roadworthy. With a lack of clarity around the word ‘roadworthy’ for both driver and insurers, there may potentially be a huge spike in insurance battles as well as numerous policy misunderstandings and disputes. 

First and foremost, the word ‘roadworthy’ is a little vague; how much noise from the engine is acceptable? How many warning lights are too many? For the untrained eye, knowing when a car is safe or not can be tricky, so ensure that you check government guidelines on car safety and get anything you’re not sure about checked out by your local mechanic as soon as possible.

MOTs are not the only vehicle conundrum many will face; policy changes, the inability to drive because of illness, SORN notices and repayments may all come into question too.

To help ease finances further, those who are reducing the amount they use their cars, keeping them in different places or have had a change of employment status can change these details with their insurance provider to temporarily lower insurance costs. However, it’s important that when and if these details revert to normal, you tell your insurance provider as soon as possible. By not amending this, your policy may be invalid leaving you unprotected if you need to make a claim.

Medical insurance

For those who hold private medical insurance, COVID-19 has created a lot of confusion for insurers and their clients alike. Due to a large number of private doctors needing to shift over to NHS-based work to help the system cope with the demand of patients who are extremely ill, it has meant a lot of private medical issues have either been postponed or cancelled. 

And despite many insurers offering refunds or details of financial changes to their customers, others have been more reluctant to share information surrounding their COVID-19 processes. For many of their clients, this means they are being left in the dark, not receiving treatment but still paying for it. 

However, new FCA guidelines state that all private medical insurers must consider every client’s individual financial situation during this time when assessing cost adjustments, not the client’s record with the insurer.

Insurers have not seen this type of demand for more than a decade and it’s not an overstatement to say millions of people’s lives in the UK depend on their support. As a client, keep in mind that all claims, adjustments or exemptions must be discussed and adapted to you as an individual and your personal situation, and for insurers it’s crucial all changes and updates are discussed openly and honestly with clients with no threat of misleading information. 

By Rhiannon Cambrook-Woods, Solicitor at Lysander Law

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