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Insurance lapses – who is responsible?

In December 2015 Terry purchased two motorbikes from a dealer who arranged insurance for Terry through a broker. Terry paid the annual insurance premiums for both bikes in one lump sum. In March 2017 both bikes were stolen from a secure garage. When Terry submitted the claim, his insurer advised him the policies had lapsed the previous December because Terry had not paid the premiums. Terry was shocked, the year had slipped past so quickly and he had simply forgotten to renew the policies.

Terry complained to us, and we referred the complaint to the insurer and the broker, both FSCL participants. To simplify matters, the insurer agreed to accept responsibility for the complaint.

Insurer’s response

The insurer went back to the broker for information about the renewal process, and discovered the broker had sent one email to an incorrect email address. Terry had given the broker his correct email address, telephone number and physical address. The insurer did not accept it had any legal liability, saying it was Terry’s responsibility to renew his insurance, but agreed the broker’s service could have been better. The insurer offered to compensate Terry for half his loss.

Terry’s view

Terry did not accept the insurer’s offer. In Terry’s opinion, the broker was entirely liable for his loss because if he had received the renewal reminder he would have renewed the policies and been insured when the bikes were stolen. Terry referred his complaint to us.


While Terry carried some responsibility for the loss, because he failed to renew his insurance policy, we considered the broker carried a greater degree of responsibility for Terry’s loss. The broker was the professional in the relationship and had sent one renewal reminder email to an incorrect email address. Terry had given the broker his correct email address, a contact telephone number and physical address but the broker had made no effort to contact Terry by another method.

It seemed to us fundamentally unfair that the broker could consider one email to the incorrect email address adequate service at renewal time. During our investigation, we asked other brokers for their view and they agreed, advising they would have tried to contact Terry using his other contact details.

The insurer also submitted that after three months Terry should have realised his policy had lapsed. The insurer asked at what point would its liability for loss end? After six months, a year or would an insurer be indefinitely liable?

We were unable to give the insurer a definite answer to this question, as each case is decided on its merits. However, we said we would take into consideration the length of time since the policy lapsed and the frequency of premium payments. If the premiums were paid monthly, we would ordinarily expect a person to notice payments had ceased after a couple of months, but if payments are annual we would allow a longer period for a person to notice payments had ceased.


We recommended, and Terry accepted, that the insurer assess the claim and split the loss on a 25/75 basis in Terry’s favour, then deduct the premiums Terry would have paid if he had renewed his insurance and the excesses for both bikes.

Our insight

A customer uses a broker’s service for help when first arranging cover, but also because the broker will provide on-going service and advice at renewal time. A broker is being paid to service a client, and can be expected to provide that service with reasonable care and skill.