FSA raps RBSI over unclear pet policies

Three RBS Insurance units have been forced to change their pet policy wording after the FSA found “unfair” claims terms in them.

The regulator also informed the Office of Fair Trading about the matter, which it is obliged to do in such cases.

However, RBSI insists that the issue was with the policy wording rather than the claims process itself, and that the revised wordings would not have changed any claims decisions it has made.

The terms were contained in pet policies issued by Direct Line, Churchill and UK Insurance, and related to claims the insurers are willing to pay.

The RBSI units’ policies contained a general exclusion against paying “any costs that we do not consider reasonable or necessary”.

In a further section on vet fees, the policy stated that the insurers would not pay for diagnostic laboratory fees that it considered were outside the “reasonable and customary amount” or any fees for treatment or complimentary therapy that it didn’t consider “reasonable or necessary”.

The FSA found that the wordings were potentially unfair to policyholders because they are unclear and because they give the insurer the power to decide what is “reasonable and necessary”.

“In our view, the original terms are not drafted in plain intelligible language because the terms ‘reasonable and necessary’ are vague and potentially subjective concepts in this context and the insurer and insured are likely to have different views on this,” the FSA stated.  

It added: “The original terms also reserve the meaning of ‘reasonable or necessary’ to that which the insurer considers ‘reasonable or necessary’ which, in the absence of more information from the insurer, the insured can never be certain of.”

RBSI stressed that the FSA action was an ‘undertaking’ rather than an investigation, and that it only needed to change its wordings, not its practices.

“We worked closely with the FSA on this undertaking and we fully support the findings, which involve clarifications to our policy wordings, with no fines or penalties,” RBSI head of pet insurance Adam Whiteley said in a statement. “The changes mean that our policies will now be even clearer, which should help customers. The wording changes do not represent any change to our procedures, which remain fair to customers.”

Whiteley added that the FSA undertaking involved taking a random sample of previous claims, which all showed that the clause under scrutiny had been applied correctly. “No previous decisions would be altered as a result of the update to the wording,” he said.

The revised wordings provide precise amounts that the insurer is willing to pay for each type of fee and a maximum overall amount for each case.

The new wordings were available to new policyholders starting 1 November, while existing policyholders were informed of the new wordings upon renewal after this date.