Thinking of making an insurance claim?

The soaring cost of home and motor insurance may be hard to swallow, but at least your policy buys peace of mind - or does it?

Watchdog has discovered that thousands of policy holders who pay their premiums faithfully are at risk of being blacklisted when it comes to claiming payouts - or worse still getting insurance at all. Riz Lateef Reports.

Deciding whether to make a claim on your insurance can be a bit of a mind field - What's covered? What's the excess? How will it affect No Claims Discounts? A quick call to your insurer should help - but beware. Even if you decide NOT to make a claim, your call could still be logged on your history, and count against you in the future.

As Simon Clayton discovered. He took out car insurance with Budget Insurance in June, but just weeks into his cover they cancelled his policy saying it was because he had failed to disclose two previous claims. The problem was he hadn't made any.

"I phoned up my previous insurer, Swift, and they told me one was for a windscreen repair and one was a notification from where I'd driven into a pothole," explains Simon.

The windscreen repair was provided free as part of his cover and didn't affect his No Claims. And the pothole had caused no damage and was just to get a reference number for his local council. But Swiftcover had logged the incidents on Simon's history AND told Budget all about them. Why?

David Hertzell from the Law Commission explains: "Insurer's are in the risk business, they are looking at you as a policy holder as a risk to them. So they want to know about claims that you've made, but they also want to know about other thing as well, including circumstances that may have happened but didn't result in a claim. And this is your record this will travel with you whichever insurance company you're with"

Budget did offer to reinstate Simons' policy - but they demanded £500 more, double their original quote, which Simon cannot afford. And what's more having a cancelled policy on his record meant he was unable to get affordable car insurance from anyone - leaving him without transport and his car parked constantly on his mum's drive.

And Simon's case isn't a one off. Insurers share this kind of information about us all the time.

One of the ways they do this is through the Claims and Underwriting Exchange- or CUE. It's a central database used by insurers to record and share details of customer's histories. Every time you make a claim the details are recorded on CUE, but if you make a simple enquiry about your policy following an incident that gets logged too.

Which is what happened to 83 year old Doris Jackson. She took out home insurance with Lloyds TSB in June 2009. A few months into her policy the river at the end of her garden burst its banks and destroyed a large retaining wall. Doris contacted Lloyds TSB to make a claim but discovered she wasn't covered at all because they said she had two previous claims on CUE which she hadn't disclosed.

Doris had contacted her previous insurer on two occasions to make enquiries about two other garden walls but neither had resulted in claims. However, Lloyds insisted that her enquiries counted as losses and she should have informed them. They cancelled her policy, left her without home insurance AND having to foot the enormous £23,000 bill for the wall repair.

And it gets worse...having a refused policy on her record meant that Doris was unable to get insurance from anyone. After being uninsured for nearly two years she has now managed to get insurance from a specialist broker, but the cost is much higher than standard policies and she is still trying to get her CUE record corrected.

Lloyds Banking Group:

"It is important for the industry to share information on customers' claims and losses for home insurance, to ensure customers are covered for valid claims and to help the industry keep premiums down for consumers. Providers often use this information when considering applications for new Home Insurance policies. Our process for recording customer information is in line with industry best practice."

Question 1

Lloyds TSB - Mrs Jackson

"The claim Mrs Jackson registered with Lloyds TSB in November 2009 is recorded on our claims system and information has also been sent to the Claims Underwriting Exchange (CUE). The two losses that Mrs Jackson reported were also recorded on CUE by her previous insurer. When Mrs Jackson took out her policy and registered her claim with us in November 2009, we asked her about any previous losses and also during subsequent visits to the property through the claims process.

"Mrs Jackson did contact the Financial Services Ombudsman (FOS) about her claim. The FOS reviewed her claim and the decision made by them was in favour of Lloyds TSB. The FOS is completely independent and impartial. This means that when they decide a complaint, they look carefully at both sides of the story and weigh up all the facts. They decide a complaint by reference to what is, in their opinion, fair and reasonable in all the circumstances of the case."

Halifax - Ms Neal

"There are a number of factors that can change an insurance premium during a quotation, but the advice of the damage to the laptop, which had not been claimed for, is not one of them based on our standard practice. We would like to speak to the customer to discuss their individual details."

Question 2

Halifax/Lloyds TSB consider a loss and claim to be as follows:

• Loss - Losing something that belongs to you, or damage to something that belongs to you
• Claim - Requesting compensation for a loss under an insurance policy

Question 3

"Lloyds Banking Group is committed to putting our customers first and offering products which meet our customers' needs. Together with the ABI, Lloyds Banking Group supports the Consumer Insurance (Disclosure and Representations) Bill which will provide legal status to the industry good practice which we already follow. The Bill will make it easier for both consumers and insurers to know their rights and obligations. "

Swiftcover:

Steve Gaywood, head of counter fraud at swiftcover.com, commented: "Like all major insurance companies undertaking good practice in the UK, we are required to log every incident that our policyholders notify us of, which the CUE system then automatically records. We do this for a number of reasons such as fraud, as well as if the policyholder returns at a future date to update the notification to a claim.

"In Mr Clayton's case, an administrative error caused a notification to be logged on the CUE system as a claim. This was an error on our part and we have now put further measures in place to prevent this ever happening again. We look forward to dealing with his insurer to update the situation and get Mr Clayton back on the road - as we do when the situation is reversed."

Budget:

Can Budget confirm exactly how Mr Clayton's enquiries were recorded on the CUE database, and why they were recorded in this way?

The information about Mr Clayton's non-disclosed claims was not provided to us by the CUE database. Instead we received this information directly from Mr Clayton's previous insurer via his NCD notification.

Can Budget explain why Mr Clayton's policy was cancelled, and why he received different reasons for the issues with his insurance quote?

We have investigated the issues and have discovered that Mr Clayton's policy was cancelled as a result of an Advisor error, and unfortunately Mr Clayton was given conflicting information about the reason for this, which has understandably caused confusion and inconvenience. Although Mr. Clayton initially provided incorrect information in a number of areas, including his NCD entitlement, when he contacted Budget the NCD information was captured incorrectly again. It was this error that generated the cancellation and not the two non-disclosed claims. Budget places great emphasis on providing excellent customer service and we are disappointed that it fell below our expected standards on this occasion. Clearly, our error has caused inconvenience to Mr Clayton, so we have contacted him to agree a compensation package that he is happy with. We have reassured Mr Clayton that he will not need to disclose this policy cancellation in any future insurance quotes, which means that this cancellation would not affect any future premiums.

Does Budget Insurance accept that a change in the law is necessary to protect consumers?

Our question set at Budget has been designed to ensure that we obtain all of the information that our insurers require to enable them to assess the risk as appropriate. This proposed law change will not remove the need for customers to provide full and accurate responses to the questions asked. In terms of the non-disclosed claims, was Budget made aware of them via the previous insurers only, or did Budget also check the CUE database? Budget was only made aware of Mr Clayton's non-disclosed claims by the previous insurer and did not refer to the CUE database.

Is information of this kind normally provided by or requested from previous insurers, or is the CUE database also checked when new customers sign up for insurance with Budget?

It is in the interest of our customers, our insurer panel and ourselves that we hold accurate information about all customers. Primarily, we rely on our customers to provide correct details and question sets are designed to help make the disclosure of information as easy for customers as possible. To ensure our records are accurate, if an insurer has checked CUE information and spots a discrepancy, we will contact the customer to discuss this.

Does Budget record claims and enquiries on the CUE database, or are some incidents and claims kept on Budget's records only?

As an insurance intermediary, we do not supply information about our customers' claims directly to CUE. Any CUE updates in this regard are supplied by the insurer. We do pass on the information provided by customers, such as their claims history, to our insurers so that they have an accurate picture of the customer they are insuring.

ABI:

"Insurers want to ensure that customers fully understand what information they need to disclose and why it may be relevant. They continually review the clarity of their application forms to make sure that customers find it as easy as possible to understand what their rights and obligations are. The last thing any insurer wants is for a confused customer, whose reasonable expectations are not met.
"Incidents reported to an insurer that do not lead to a claim may be relevant and should be disclosed to any new insurer as some insurers have claims data that shows that someone who reports an incident is more likely to claim in the future. Also, reporting an incident to your insurer notifies them of any possible claim that may be made against you at a later date -for example if you are involved in an accident involving another motorist or a pedestrian. The golden rule should be to tell your insurer and let them assess whether or not any incident may be relevant to the risk you present.
"The Claims and Underwriting Exchange (CUE) database helps to prevent fraud, for example where a claimant tries to make the same claim from multiple insurers. It also helps insurers to identify insurance cheats - those people who deliberately lie about previous claims to try and get cheaper insurance. Insurance cheats and fraud are significant factor that push up the price of insurance for honest customers.
"If there is a discrepancy between the record on CUE and the information that the policyholder has supplied, the insurer may discuss this with the customer and/or previous insurers to seek clarity. The database is not intended to be used by insurers as a way to catch out a customer who has made a genuine mistake".

Insurance Database Services Ltd Response:

The Claims and Underwriting Exchange is a database of more than 40m records. The insurance industry uses it to check that the claims history provided to them by a new policyholder matches the records on the database.

The database plays a significant role in the prevention of fraud, which contributes to the cost of insurance premiums. It is used by the industry and the Insurance Fraud Bureau (IFB) to detect and prevent multiple claims being made fraudulently.

Where information held on the database is inconsistent with the policyholder's disclosure, then the insurer may query this with the customer and if necessary the previous insurers.
There are currently 100 members who are responsible for recording and accessing data on the insurance database.

Insurers are required to register both claims and incidents that could lead to a claim on the CUE database. Records on CUE show whether the incident resulted in a claim and if a payment was made. The information held on CUE should simply reflect that which is on the insurer's own claims system.

If you wish to find out what information is held about you on the CUE database, please print and complete the form on the IDSL web site (http://www.insurancedatabases.co.uk/media/2893/data_subject_access_request_form.pdf). This can be sent with the administration fee of £10 to the address below. Cheques or postal orders should be made payable to IDSL. Please note that cash is not acceptable.
If you are unable to access the attached form we are happy to accept written requests as long as they are accompanied by the administration fee and suitable identification. Acceptable forms of identification are:

• Utility Bill
• Local Authority tax bill
• TV License
• Correspondence from HMRC
• Land registry confirmation
• Vehicle registration document
• Student loan statement

As part of your written request please include your date of birth and address information for the past 6 years as well as any former names i.e. maiden name you have been known by in this time.

Requests for personal information held on CUE should be addressed to:

IS & Compliance Officer
Insurance Database Services Limited (IDSL)
Risk & Compliance
Linford Wood House
6 - 12 Capital Drive
Milton Keynes
MK14 6XT

The information contained in the database will comprise that supplied by the policyholder or claimant on their application or claim form, together with other information relating to the incident or claim. It does not hold sensitive information or details relating to the amount of premium paid.

Anyone who thinks that they have registered incidents with only one company can contact that company for their claims information without going through IDSL.