Sir, – Joanne Hunt’s reminder to homeowners of the importance of insuring their homes for full value was both timely and informative (“With construction costs on the rise, is your home properly insured?”, Your Money, August 16th).
Whilst the focus may have, necessarily, been upon what shortfall might arise in the context of a total, or catastrophic, loss, homeowners should be acutely aware that the “underinsurance” or “average” clause will proportionately reduce the level of settlement for each claim.
Total-losses are, thankfully, rare occurrences. Most domestic insurance claims are for more modest amounts, and yet, when deductions for underinsurance are applied, the policyholder can often be left with a gap that must be filled through the use of savings or loans or a combination of both.
This is not satisfactory. The “underinsurance” (or “average”) clause is a mechanism that originated in commercial insurance.
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There is clear authority that UK courts will not imply the principle of “average” to household policies. Indeed, most domestic insurance policies issued by UK insurers do not incorporate underinsurance clauses.
It is our experience as policyholder representatives that underinsurance has now become the key factor that limits claim payments, often with catastrophic effects for the policyholder. A domestic policyholder cannot be an expert in determining the building sum insured.
For that reason, and in the shadow of the Consumer Protection Code and the Consumer Insurance Contracts Act, the continued presence of the anachronistic “average” clause in Irish household insurance policies cannot be justified. – Yours, etc,
JOHN O’DONOGHUE,
Cork.