Online policy errors leave insurers open to pay-outs in excess of £20m
Eagle Star, RAC, Legal & General and Bonapart Direct are among the motor insurers who have left themselves exposed to unlimited liability through "bad practice" on their websites.
By failing to alter policy wordings online, the insurers opened a legal loophole that could leave them exposed to a repeat of the £50m Selby liability that faced Fortis and its reinsurers.
Research by Insurance Times has identified some of the insurers referred to in a report by independent consultants Defaqto that drew attention to the poor management of insurers' websites.
Defaqto research director Brian Brown states: "Defaqto has identified many examples of bad practice in online selling, or clear flouting of GISC rules regarding online sales."
Though the report did not name the insurers, it warned that the £20m limit of liability introduced after the Selby accident had not been applied to some online policy wording, leaving insurers open to unlimited exposure.
Under contract law the terms of an insurance policy are defined by the contract offered on proposal of the scheme, in this case the online document. A number of insurers have sold policies during 2003 with this built-in flaw and are therefore carrying rogue liability.
Brown states: "While many insurers have changed their wording since publication of the report, a quick scan of the internet showed RAC and Bonapart had still not included the £20m limit on its online wording."
