Quote and unquote: Insurance buyers are often misled over true cost of cover

A CONFERENCE co-ordinator living in south-west London, Bernadette McNamara decided to do as the insurance advertisements suggest - she shopped around before she renewed the policy on her Vauxhall Nova this year.

'My original insurer was Direct Line, but I rang quite a few other companies to get quotes. One was a few pounds cheaper and seemed a great offer,' she says.

But when the paperwork arrived from the intermediary she had used, the new insurer had imposed a pounds 150 compulsory excess and pounds 150 voluntary excess on all claims. 'They hadn't mentioned any excess at all to me on the phone,' she says. Ironically her existing pounds 100 excess from Direct Line was just about to be removed, since she was about to turn 25.

With only a few hours left before the new policy was due to start, she tried unsuccessfully to talk to the intermediary. When she finally got through, the policy had been in force for 30 minutes. 'They told me if I cancelled I would lose the whole premium,' she says. 'I discovered that the pounds 390 had already been deducted from my Barclaycard.'

Ms McNamara took advice from her local Citizens' Advice Bureau and sent off a fax to the company. Eventually, her premium was refunded and she has now returned to Direct Line.

According to the National Association of CABs, difficulties like this are a recurring problem. In another case, Craig Wormald from Congleton, Cheshire, arranged to purchase a Ford Orion only after he had ensured he could afford the insurance. When he came to arrange the cover, however, the premium he had been quoted had increased by about pounds 200. 'I was really angry, and went to get some legal advice,' he says. In the end, he managed to arrange the insurance at the original price, the intermediary claiming that the higher figure had been given in error.

Steve Wiseman, manager of Norwich CAB, says his bureau has encountered several similar cases. 'It's a long-running problem. The brokers may miscalculate, or forget to ask certain questions. Or sometimes the buyer hasn't given all the relevant information.'

For some motorists the suspicion remains, however, that commission-hungry intermediaries may wilfully get their sums wrong initially, in order to attract new business.

According to Alison Carr, deputy registrar of the Insurance Brokers Registration Council (IBRC), problems with motor insurance, especially misquotations, make up the bulk of complaints they receive.

'The Council is very strong on this: provided the broker was given all the material facts by the customer, they must provide insurance for the quoted price,' she says. If necessary, brokers must carry any extra costs themselves.

Under a 1977 Act, the term 'insurance broker' can only be used by intermediaries who have registered with the IBRC.

However, relatively few intermediaries - about 3,800 firms, and declining - have chosen to register. In any case, the IBRC's only disciplinary sanction is to remove a firm or individual's registration as a broker (127 such 'erasures' took place last year). Firms in this position can carry on trading, for example as 'insurance advisers'.

Intermediaries who are not registered brokers have their own Code of Practice drawn up by the Association of British Insurers. However, this is not a statutory scheme (the Government this year declined to legislate) and the ABI does not directly police the operation of the Code. Instead, ABI's member insurance companies are asked to ensure that their agents and intermediaries adhere to it.

What this means in practice is that motorists are less protected in cases of misquotation. 'Unfortunately the situation is simply that you have to got to pay the full amount,' an ABI spokesman says. 'The insurance company would want to see the actual premium for the risk insured.'

However, advice workers challenge this approach. Motorists who have supplied all the relevant details should not be bounced into paying higher premiums, they say.

The Code of Conduct includes a procedure for dealing with public complaints, but there are few disciplinary sanctions. The Insurance Ombudsman can offer assistance only if the insurance company can be shown to be at fault. 'We have no jurisdiction over intermediaries or brokers,' says Chris Hamer, bureau manager for the scheme.

The answer appears to be for motorists to take care of themselves, by ensuring wherever possible that quotations are written down, and by being cautious before parting with their credit card number.

(Photograph omitted)