You agree to the terms and conditions when you sign up for an insurance policy. If they are unfair, standard clauses can be challenged.
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Interpretation of insurance clauses
- It is often the interpretation of a clause that is most important.
- Insurers are responsible for making sure their policies are clear. They run the risk that the clause will be interpreted in favor of the policyholder if they don’t.
- The FCA Handbook of Rules and Guidance requires that insurance companies provide information that is clear, fair, and not misleading.
- If an exclusion clause in your policy is unclear, it must be taken against the insurance company and in your favor.
In such cases, the interpretation that favors you should prevail.
If your insurance company does not agree with your interpretation, you should notify your insurer that you want to refer the matter the Financial Ombudsman Service.
A term does not have to be unfair simply because it appears unfair. It all depends on the details of the entire contract.
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Unfair Terms
- The following legislation will apply to your insurance contract.
- If your insurance contract was signed before October 15, 2015, the Under the Unfair Conditions in Consumer Contracts Regulation 1999 is applicable.
- The Consumer Rights Act 2015 applies if you have signed an insurance contract after October 2015.
- Both pieces of legislation allow for standard clauses to be challenged if they are unfair.
- You could be subject to unexpected changes by the insurance company, including binding you to hidden terms or excluding or limiting certain legal rights.
- Both acts define unfairness as a term that causes significant conflict between the rights and obligations for the company and you to your disadvantage.
- Unfair terms can also be deemed unfair if they are not in accordance with the requirements of good faith. These terms must be negotiated, designed and agreed to by the consumer in an open and fair manner.
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Financial Conduct Authority
- The FCA is responsible to evaluate the fairness and validity of all types of financial service contracts, including insurance.
- If you feel that a term in your policy might be unfair, you can send it to the FCA.
- You can refer your dispute to the Financial Ombudsman Service in order to resolve it.
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- Some terms are ineligible and cannot be challenged. These terms are called ‘core terms’. They describe the terms that specify the price for a product or service.