Barry's blog: The curse of the wriggle clause

How many times do I say that there’s no such thing as a cheap insurance deal? It all looks good on paper until the crunch comes - the claim, or incident that might be a claim - and then, often, things go pear-shaped.

I see so many of these ‘deals’ emanating from the big banks (not only those that we, as taxpayers, own) as incentives to help the sales process for another of their products: credit cards, fancy-sounding current accounts and even loans.

By definition, this stuff is not underwritten individually but account underwritten, and margins are cut to the bone. Whenever I hear that expression I know, and you know too, when it comes to the claim the risk carrier is going to look for the ‘wriggle clause’.

One example that is dear to my heart is mobile phone insurance. Why? Because my daughter has had the misfortune to want to make a legitimate claim and can’t. Naturally, she asks what’s going on. I look into the policy and am dumfounded by the terms and conditions. More of that in a moment.

If an insurance broker had supplied such a product, it would be hauled over the coals in short shrift. If that broker had not explained the cover and conditions, then they would deserve everything that came their way. That’s what regulation is all about.

Yes, she was given the policy document and is therefore bound by its wording. But, and it’s a big but, to rely on a condition that says claims must be notified in 48 hours is unreasonable and certainly not a normal clause in a normal paid-for policy. Laughably, their policy states that you should telephone their claims bureau - difficult if you have lost your phone and are perhaps abroad or out of touch with civilisation as we know it!

To offer any product with a condition that must be, or verges on being, an unfair contract term smacks of two-tier regulation. I feel the banks are abusing their position of trust by using large-scale operations to sell, and in some instances to give away, duff insurance policies. They seem to have forgotten that insurance is a promise to pay if certain events happen, subject to reasonableness by the insured (aka terms and conditions) in lieu of using these no-frills policies to achieve other objectives.

While latest news indicates that banks will have a separate regulator in the foreseeable future, the insurance arms of these monoliths will still be, it appears, in the same catchment as the professional insurance broker. If that is to be the case, then make them accountable and responsible as we are. And if the bank is selling these duff policies without the intervention of their regulated insurance divisions, then the regulators should be aware of the issues involved and we, as insurance brokers, should not expect more levies because of the banks' avarice.

Such ‘wriggling’ gives the whole insurance industry a bad name, and the bit that particularly annoys me is that insurance brokers have to pick up the tab. I’m sure you still find the PPI mis-selling scandal grates as, if you’re an insurance broker, you are paying for others’ sins through the ever-increasing levies from the FSA (or whatever its manifestation in the future).

And what happens when the claims, such as my daughter’s, are rejected? Shrug shoulders and move on? Ombudsman perhaps? FSA complaint? And ultimately more levies?

To paraphrase the moral of the Greek legend The Trojan Horse, beware of bankers bearing gifts!

Barry Fehler is a director of the IIB, chairman of Broker Direct and deputy chairman of South Essex Insurance Brokers