Insurance cover that didn't pay out revealed in FCA data

Personal accident insurance add-ons may come under scrutiny (picture posed by model)

Thousands of insurance policy "add-ons" only produce a handful of claims, new data shows, raising renewed concerns over their value.

Figures collected by the City regulator showed that, in particular, personal accident cover sold alongside home or motor insurance rarely led to payouts.

Nobody claimed over the course of a year on one particular policy covering the risk of serious injuries.

A campaigner accused insurers of abusing customers' lack of expertise.

'Put consumers first'

Add-on insurance is where a policy is sold alongside another product.

The Financial Conduct Authority (FCA), the main financial regulator, has said that there is a risk that many of these policies offer poor value for money, previously declaring that "firms must start putting consumers first, and stop seeing them as pound signs".

Thousands of complaints have now led the FCA to publish data showing the frequency of claims, their success rate, and average payouts in the 12 months to the end of August.

Under personal accident cover add-ons, four of the eight policies included in the data saw a maximum of one claim from an average of at least 25,000 policies.

No-one claimed

In the case of one policy from Liverpool Victoria (LV), nobody at all claimed throughout the year.

The company defended itself and said: "All LV= comprehensive car policies cover personal accident with a limit of £10,000, but customers who want extra peace of mind can choose an extended personal accident benefit of £100,000.

"The extended personal accident benefit is selected by a relatively small proportion of our customers.

"The add-on represents good value to those customers who want extra protection, by providing what is essentially catastrophe cover, for the modest price of £19.90 per year."

The company said it had questioned whether the FCA's analysis was suitable for such cover.

Campaigner James Daley, of Fairer Finance, said customers who only occasionally bought an insurance add-on had no idea whether they were paying a fair price or not.

As the policies were sold alongside another product, customers did not have the chance to check on price comparison sites to see whether these add-ons were a good deal.

"There needs to be a mechanism in place to ensure this is not abused," he said.

But the insurance industry said customers should consider whether they really needed these policies.

"Our own claims analysis has highlighted some common areas of misunderstanding and we have published a home insurance guide to help consumers," said James Bridge, assistant director at the Association of British Insurers.

"Customers also need to ensure that they do not simply buy on price but make sure they have cover at the levels they need."

He pointed out that the vast majority of actual claims were paid out.