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The Actuary The magazine of the Institute & Faculty of Actuaries

Insurers win more than two-thirds of disputed claims

UK companies that take their insurers to court or public arbitration over the non-payment of a claim only win around one in three cases, new research has found.

Many do not understand their insurance policies ©ShutterstockMany don't understand their insurance policies ©Shutterstock
Many don't understand their insurance policies ©Shutterstock

The industry most involved in public disputes with insurers is construction, which only wins 25% of claims, followed by the manufacturing and transport sectors.

And it takes around three years for disputes to be resolved on average, with just 60% of the original amount claimed typically paid out when settlements are made.

The findings are based on every court case or arbitration appeal related to payments under primary business policies from 2013-19, excluding consumer and reinsurance cases.

Bruce Hepburn, CEO of insurance governance firm Mactavish, which carried out the research, said: “Our findings are disturbing for organisations looking to challenge their insurer’s decision not to pay out on a claim when they perceive the decision to be unfair.”

The majority of disputes that firms have with insurers are settled through private arbitration, primarily because of unfavourable policy terms that limit policyholders’ options.

The main causes of insurance disputes are to do with whether a loss is covered by a policy, the researchers also found, followed by how the value of the loss is calculated.

Breaches of policy conditions and inadequate risk disclosures cause many disagreements too.

And the researchers said there is a growing trend for insurance companies to dispute claims because there has been a late or incomplete notification from their clients.

This comes after Mactavish found that insurers dispute nearly half of all large commercial claims, with many firms thought to have a poor understanding of their policies.

"Hiring professional consultants can greatly enhance your chances of success – both to prevent disputes arising when handling a claim and to resolve them if they do," Hepburn added.

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