Why are insurers barring ex-cons?

In common with many ex-offenders Graham Willis (not his real name) returned to live with his family following his release from prison.

Three months after his release, the Willis family made a claim on their contents insurance after their washing machine flooded their kitchen.

Much to their surprise, the family were contacted by their insurance company who told them that it would not pay the claim. Their policy was also to be cancelled and the premium returned.

When asked why the company was taking this action, the Willis's were told that they had breached the terms of their policy by not informing the insurer that there was now an ex-offender living in the house, a policy clause that the family had been unaware of.

Willis's story is not an unusual one. He is one of a growing number of people who are finding it difficult, if not impossible, to find insurance cover because of their criminal record.

Bringing change
But brokers are bringing about change. They have begun to see the potential of the ex-offender market and schemes have been set up targeting convicted criminals.

Square Mile Insurance is one of the brokers that specialises in ex-offender risks. The company works with Unlock, an ex-offender charity, and prison service outreach workers. It is often contacted by prisoners, prior to release, eager to reconstruct their lives.

It provides quotes for travel, personal accident, household, motor, commercial lines liability, and small business combined policies, all underwritten through Lloyd's syndicates.

Square Mile director Jan Knights says that with about 1,000 ex-offenders and their families on the books of Unlock, the potential for the market is huge.

"People come out of prison and want to get on with their lives, but they can't without insurance. People do genuinely repent and try to go straight, so there is a genuine need for the industry to provide this service."

It is standard practice for insurers to ask for the disclosure of criminal convictions at the point when a policy is quoted for, but the circumstances of the insured are often subject to change between the point of sale and when a claim is made.

Under the terms of the Rehabilitation of Offenders Act [1974], most criminal convictions can become ‘spent', meaning they do not have to be declared when applying for a job or obtaining insurance.

The length of time before a conviction becomes spent depends on the nature of the crime and the length of the sentence imposed. A prison sentence of up to six months become spent after seven years, while fines, probation orders, community service sentences and anti-social behaviour orders become spent after five years.

Custodial sentences of more than two and a half years can never become spent.

But once you have done your time surely your conviction should be spent? Julie Wright, the deputy chief executive of Unlock, says: "Once a sentence is completed, an offender has done his time, so why should he, and possibly his family, continue to be punished for it?"

Insurers have been less than keen to insure ex-offenders. Knights has been trying to place cover for ex-offenders for the past four years, but has not seen much interest from insurers.

"The composite insurers are completely uninterested in this market. It's like banging your head against a brick wall," she says.

Insurers defend their stance on the basis that ex-offenders are a greater risk. A spokesman for the ABI says that even though they had completed their sentence, they still represent a higher risk to insurers than those without convictions.

"This attitude is not discrimination, it is a matter of risk assessment. Insurers simply look to manage their risk exposure," he says.

Unlock rejects insurers arguments that ex-offenders are a greater risk. Chief executive Bobby Cummines says: "They are a safe risk. They know that if something goes wrong, they will not find cover anywhere else. There is too much riding on their ability to obtain insurance, for example their mortgages and ability to start a business, for them to jeopardise it."

No fraudulent claims
Cummines has established Esteem Insurance, a broker specialising in placing cover for ex-offenders. He says that in the three years of running Esteem he has not see one fraudulent claim from an ex-offender.

He said the ability to write business for ex-offenders very much depended on the relationship between the broker and the insurer.

Biba head of technical services Peter Staddon says brokers were aware of the problems ex-offenders had in getting insurance cover, but that there was no industry standard in dealing with ex-offenders.

Staddon says Biba has received some calls from members of the public and referred them on to specialist brokers, such as Square Mile and Esteem.

Wright makes the added point that the attitude of insurance companies in refusing to provide cover encourages sex-offenders to lie to their insurance companies.

Royal & SunAlliance (R&SA) account underwriter Alan Hewitt said there are valid reasons why insurance companies ask questions about a person's criminal record.

But he said they were concerned only with offences which were material to the risk being underwritten. "If a customer makes a claim and it comes to light that they have failed to declare a conviction or caution, or that in the case of household insurance, that someone who is living there has an undisclosed conviction, the insurer has the right to void the policy and keep the premium paid.

"In the case of innocent non-disclosure, where the policyholder was genuinely unaware they had a duty to inform their insurer of the change of circumstances, then we would refund the premium."

He adds R&SA would be willing to consider offering cover to ex-offenders depending on whether or not they were deemed to make the insured a material risk.

Norwich Union said it would be willing to offer insurance to those with previous convictions, depending on the crime they committed.

The issue of insurance cover for ex-offenders is a major one. 1.4 million crimes are detected in the UK in 2003/04.

Unlock says that a third of all men under the age of 40 have a criminal conviction, for offences ranging from minor speeding convictions to violent offences.

Unlock is compiling a list of companies which it says discriminate against ex-offenders, and plans to name and shame the insurers which it believes are the biggest culprits, as well as organising a boycott of their services. IT