Home insurers are declining too many claims

One in four home insurance claims are being rejected, as a wave of systematic industry failings leaves customers in dire circumstances.

If something goes wrong, you might assume your home insurer will make it right. After all, this is what we pay our premiums for.

Yet the number of buildings insurance customers going to the Financial Ombudsman Service is at its highest in five years.

More of those complaints are being upheld - 40%, up from 31% a year ago.

Having your home insurance claim declined could leave you tens of thousands of pounds out of pocket, or even homeless.

This article is the first in a series of three examining deep-rooted problems in home insurance, also looking into long delays resolving claims and meagre payouts for claims. Here we look at claims being unreasonably declined. 

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A grubby battle over a septic tank

In February, Nicola Carden (pictured) discovered heavy rainfall had forced her farm's septic tank out of the ground. The damage and clear up cost over £20,000. 

Fortunately, she had insurance - with a policy from Halifax covering the main farmhouse and another from Ageas covering four flats on the property. She put in claims with both, and they each contracted engineers to inspect and report on the damage. 

Halifax quickly accepted and paid its share - £4,188. But getting Ageas to pay its £16,776 share involved a hard fought battle over eight months.  

Excuse #1: 'Faulty workmanship'

The engineer's report commissioned for Davies Group - Ageas' claims handling company - suggested the tank hadn't been properly installed. Specifically, the engineer hadn't seen evidence of shingle at the tank's base. which is used to anchor tanks in position. 

Under the policy's Faulty Workmanship exclusion, the claims handler declined the claim. Nicola complained, but the company held its view.

Nicola sought the assistance of a specialist drainage investigator, DIH Ltd. In August - when she finally had the tank replaced at her own expense - they were able to supply photographic evidence to overcome the Faulty Workmanship decision. 

Shingle had actually been in place, but it had fallen underneath the tank when it was dislodged in February and so hadn't been visible to the engineer.

Excuse #2: 'Gradual damage'

Claims handlers at Davies Group finally relented on their initial objection, but were quick to raise a new one. They argued that an engineer's report suggested the tank had been undermined by a leak, making it susceptible to being forced out of the ground.

This meant the claim couldn't be considered 'accidental damage' - as it had happened gradually - and so wasn't covered.

Interestingly, this time they weren't referring to their engineer's findings - which cited the cause of damage as 'external force' - but to Halifax's report. Halifax had accepted Nicola's claim as a valid accidental damage claim, and doesn't share or endorse the gradual damage interpretation of its report.

What the insurers told us

In September, we contacted Ageas and Davies Group about what appeared to be a dubious cherry-picking approach when it came to mixed evidence. The two firms told us that in late August, Davies Group referred the claim to Ageas for review and 'technical clarification' - and it ultimately decided to pay the claim shortly before we contacted them. 

Ageas told us 'We are now discussing the case with the Davies Group to see what lessons we can apply to continually improve our claims service.'

A Davies Group spokesperson commented 'When additional information comes to light during the claims process, we will always re-assess on the merit of new evidence.' If it wasn't clear whether the claim was covered, it said it asked the insurer.

They added 'We are currently engaging with Mrs Carden's representative to settle the claim. We apologise for any distress the delay in this process has caused her. We are now conducting a full internal review on how this claim was handled to investigate how we can be more efficient in handling claims with multiple complexities in the future. In the meantime, our customer relations team will be in touch with Mrs Carden and her representative directly to apologise for the delay in processing this claim.' 

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Buildings insurance only pays out 2/3rds of the time

Nicola's experience of having her claim turned down wasn't a fleeting exception to the rule.

During 2022, some 99% of car insurance claims were accepted - but this figure was just 68% for standalone buildings cover, and 76% for claims on combined home insurance or standalone contents policies.

Of 34 types of insurance the Financial Conduct Authority (FCA) publishes claims data on, standalone buildings and contents cover are among the five products least likely to pay out - with combined cover the sixth least likely. 

As well as complaints to the ombudsman being a five-year highs, with more upheld, between the full years 2021/22 and 2022/23, numbers of complaints received by the FOS have increased by a quarter (24%).

Many claimants may not be aware of the ombudsman, or independent investigators like the drainage firm used by Nicola's. They may think they have no choice but to accept their insurer's decision. 

• Find out more: how to complain to the FOS

Worst offenders for wrongly-declined claims

In July, we made a Freedom of Information Request to the FOS to find out which firms most commonly had complaints relating to declined claims upheld. 

Between the 17 firms receiving 30 or more complaints in the year 2022-2023, the average uphold rate was 24%. However, eight firms had higher rates than this.

When we asked these insurers about their above-average upheld rates, Fairmead Insurance Ltd argued that the number of complaints relating to declined claims accounts for less than 1% of new received buildings claims. 

This is a valid point - a high uphold rate with the FOS doesn't mean high volumes of customers are moved to complain in the first place. However, it doesn't explain away why customers who seek FOS involvement are more likely than usual to be found to be in the right. 

HDI, meanwhile, argued that in many of the upheld cases concerning declined claims, the FOS hadn't disagreed with the claims decision itself - but had upheld parts of the complaint for other reasons. QIC Europe didn't provide a comment.

How to navigate the claims minefield

For too many customers, claiming on your home insurance is a convoluted and sometimes distressing experience. 

Sometimes, preparation can help make the claim a smoother process. Check our guide on making a home insurance claim, packed with tips on when a claim is worth making, what you can do to prevent problems and how to complain if they arise. 

It also shows how providers have ranked for claims service, based on feedback from customers. 

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