Decision by the Financial Services and Pensions Ombudsman (FSPO) – 2020-0159
The Irish insurance market still relies heavily on oral communication, and the formal recording in writing of information and advice provided by insurance intermediaries is one of the main sources of professional liability claims.
In 2015, a client took out a car insurance policy through a broker to insure her vehicle.
This policy was renewed twice without her agreement, at a significant increase in premium. Having realised her mistake, she asked the insurance company to cancel her policy before the expiry date. When the insurance company refused, the client issued a writ against her broker, claiming that when she took out the policy – over the phone – he had not told her that it would renew automatically. The broker had apparently told her that the contract would expire in July 2016, i.e. at the end of the first policy period.
The broker denied these allegations, stating that, by signing the policy, the client had given her written agreement for the policy to be renewed automatically. The client then took the matter to the Irish Financial Services and Pensions Ombudsman (FSPO).
After reviewing the recording of the telephone conversation, the FSPO found that the client had not received sufficient information from the broker regarding the automatic renewal nature of the policy and that this should have been made very clear by the intermediary at the time the policy was taken out, as it did not contain any information specific to renewal.
It further found that the broker had not taken the necessary steps to obtain her informed agreement on this point. The FSPO therefore found against the broker.
This judgment assumes some importance for insurance intermediaries, in as much that it provides a reminder of the need to obtain the informed agreement from clients regarding the specifics of a policy, especially when distance-selling an insurance product.
In this case, the broker should have emphasised the automatic nature of the renewal of the policy and been in a position to provide evidence of his client’s agreement either in writing or in another durable medium.