Every safety net needs a safety net

What do you do when your insurance against disaster fails to protect you? John Andrew has some advice

HAS YOUR insurance company refused to pay up after a car smash? Did your holiday end in disaster when a thief stole your luggage - but you can't get the money back on your policy?

You need to consult the Insurance Ombudsman Bureau (IOB), set up in 1981. The IOB has over 50 staff, many of whom are lawyers and the ombudsman himself is Walter Merricks, a solicitor.

The service, which is provided free to complainants, is funded by most, but not all, of the nation's insurance companies. Its annual operating budget is just over pounds 3m. Though funded by the industry, the ombudsman and his staff are keen to stress their independence and impartiality. Indeed, the previous ombudsman, Julian Farrand, was often at loggerheads with some members of the scheme whom he felt were obstructing his work.

Of the general insurance cases investigated, which are those relating to non-life cover such as car, travel and household policies, about one third are found in favour of policy-holders. For life cover, the decisions are evenly split.

The scheme was originally established to deal with complaints about personal insurance policies. Commercial cover can only be investigated if the insurer agrees. Most of the other schemes encourage individuals to resolve any dispute through a company's internal procedure before involving the ombudsman, but the Insurance Ombudsman Bureau does not.

Policyholders with a complaint complete the bureau's form and forward it to its enquiries and applications department. The bureau will then contact the insurer, which in turn writes to the policyholder outlining its complaints procedure.

This must be followed to the point where the insurer reaches a "final decision". If the complaint remains unresolved after two months, the policyholder must contact the bureau who will pursue the complaint further.

The ombudsman can deal with complaints if:

t It concerns an applicant personally,

t It relates to a policy issued in the UK by a member of the scheme,

t It is about a claim or the administration of the policy.

The ombudsman cannot investigate complaints if:

t The dispute is with someone else's insurer,

t The complaint relates to the level of premiums or decisions as to which risks to cover,

t The matter is already subject to legal proceedings,

t More than six months have elapsed since the insurer's "final decision".

During 1997, the bureau received 67,601 enquiries - 53,432 by phone and 14,169 by post. More than half - 35,027 - related to matters outside its terms of reference.

Of the 32,574 enquiries within the terms of reference, only 4,629 led to an investigation by the bureau - 27,945 were either resolved under insurers' internal complaint procedures, or the complainants did not proceed. The investigated cases do not include these where the insurer decided to raise its offer or withdraw its rejection of a claim before investigation by the bureau.

The ombudsman's annual report for 1997 notes: "This happens on a number of occasions and it is for this reason that no complaint may be investigated until the insurer's chief executive has had the opportunity of reviewing the matter." This suggests that policyholders should never give up.

Basically, the scheme covers: household, motor, travel, health, loan protection and personal accident insurance. Despite the fact that officially other types of work were transferred to the Personal Investment Authority Ombudsman Bureau (PIAOB) in July 1994, the IOB continues to adjudicate on some cases involving life and long term insurances (which includes permanent health cover).

Although term assurance (a policy which pays out a sum should the policyholder die before a certain date) and some permanent health policies are technically not investments, the PIAOB has taken these under its wing. Nevertheless, last year, the IOB investigated 826 such cases.

These were dealt with under the terms of an agreement with the PIAOB. Insurers decide whether cases should be investigated by the IOB or the PIAOB.

Policyholders in dispute over term or permanent health insurance should ask their insurer which ombudsman deals with complaints.

Having investigated a complaint, the IOB's decision is final. There is no right of appeal, but policyholders are free to take legal action against the insurer. The ombudsman has the power to impose payments of up to pounds 100,000 on insurers. In 1997 the awards totalled over pounds 6m, with the highest being pounds 250,000. The average for general insurance was pounds 3,065 and for life and long term insurance pounds 5,629.

The Insurance Ombudsman Bureau may be contacted at: 135 Park Street, London, SE1 9EA (0845 600 6666)