Insolvency is when an insurance company goes bankrupt (e.g. Policyholders might have many questions when an insurance company becomes insolvent (e.g.
- What happens to the money that I have paid for my policy?
- Are you covered? How do I file a claim if I am covered?
- What happens if I have a claim that is in progress?
- Who will do this? Where can I get more information?
Here are some things to look forward to:
Policyholders are usually able to find out who appointed an insolvency practitioner (IP), to help them with their financial affairs once an insurance company goes bankrupt. However, the IP might ask the broker or brokers to do so. Learn more about the different parties that might get involved.
There are two possible outcomes for policies customers have with the bankrupt insurer.
- Customers will continue to have coverage even though the policies are being replaced by a new insurance company.
- Customers could be eligible for a refund depending on the cost of their insurance premium portion.
It may take some time to determine if customers’ coverage will be replaced or refunded. During this time we will be working closely with the IP and brokers.
Usually, you will be contacted by the IP, broker or FSCS when there is an update that has an impact on you. You can also sign up for progress updates via our website. Simply search for the firm you are interested and enter your contact details.
A new insurer is needed to replace the insurance coverage of policyholders
If an insurance company goes under administration, brokers who sold policies might try to find another company to replace them. If the insurance company fails to provide all types of insurance coverage, this might be easy.
This arrangement has the advantage that customers don’t have to search for a replacement policy. They are provided with details about their new insurer and policy after it’s been arranged. If they aren’t satisfied, they can ‘opt out’ of the arrangement.
If the broker, working with the IP and FSCS, is successful in arranging the replacement of coverage, FSCS may pay our compensation towards all polices for eligible policyholders.
Premiums paid by policyholders to return their insurance policies
If the insurance company fails to find a suitable replacement, or because they sold a wide range of policies, FSCS may be able to pay policyholders a partial reimbursement of their premium. This can help them arrange new coverage.
The amount of the policy premium reimbursement is determined by the court-appointed insolvency specialist. This is usually less than the original cost of the insurance policy. This is because:
- The total cost of insurance includes administration fees. FSCS cannot protect the premium portion of the policy.
- The policy premium refund shows how long the policy was active.
- We cover 90% of all general insurance policies.
After the IP has calculated the amount of the refunds, the IP will pass this information on to us. The policyholder’s refunds are then paid by bank transfer or cheque.
The PRA will pay compensation to most UK customers of failing insurance companies. This includes individuals and small businesses with a turnover below PS1million. Risks that are based in the UK usually get covered. Find out more about eligibility.
What happens to policyholders’ claims
If your UK account is held by a regulated insurer that has been closed, it is possible for your policy to still be valid. Otherwise, claims against your policy will proceed in the same manner as with the insurer.
Although we don’t accept insurance claims, we will pay valid claims for policyholders who are eligible. The run-off agent (IP) is responsible for handling claims from start to finish. However, the IP supervises and approves the decisions.
What would happen if you were involved in a claim?
For details on how to make a claim if you have an active claim with an insolvent insurer, please visit the website of that insurer. The search box at the top of every page can be used to search for the company. Most often, you will contact the claims agent or company that you dealt with before they got into trouble.
What happens if your claim is denied?
If you are not given instructions from the IP, your broker or insurer, follow the guidelines in your policy documentation.
You can find out who is handling claims for the failing insurer here
- Visit the website of the insurance company and use the contact information.
- Your broker may be able to assist you if you are still having trouble finding what you need.
- This information is also available on our website. To be taken to the page dedicated to the company, simply search for the name of the failing insurer in the box at top of each page.
- To receive updates on the insolvency process, you can also submit your contact information via this page.
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