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Insurance claims
How we handle your claim
for compensation
Financial Services Compensation Scheme
7th Floor, Lloyds Chambers
1 Portsoken Street, London E1 8BN
Helpline: 020 7892 7300 Fax: 020 7892 7301
www.fscs.org.uk e-mail: enquiries@fscs.org.uk
Contents
• Glossary of terms 4
• Where to contact us 4
• About the Financial Services Compensation Scheme 5
• What the Scheme covers 6
• Scheme rules: the main points 8
• Claiming compensation 9
• Receiving compensation 10
• Complaints 11
• Frequently asked questions and answers 12
• Other organisations that can help 14
2 Financial Services Compensation Scheme Financial Services Compensation Scheme 3
Glossary of terms About the Financial Services
Compensation Scheme
Authorised company - A company, firm, partnership or individual The Financial Services Compensation Scheme acts as a ‘safety net’ for
permitted to carry out a regulated activity by customers of finance sector companies. We compensate consumers if an
the FSA. authorised company is unable to pay claims against it. The Scheme covers
Small business - Turnover of less than £1million a year. insurance, deposits and investments and is funded by the industry.
In default - The company is unable, or likely to be
We aim to be open and approachable, and to treat everyone fairly and
unable, to pay claims against it.
sympathetically. In this way we hope to prevent misunderstandings and
EEA - European Economic Area.
unrealistic expectations about what we can do. We can only pay
Eligible - Qualifying for compensation under Scheme compensation according to our rules.
rules.
FSCS or the Scheme - Financial Services Compensation Scheme. This booklet is a general guide explaining how we handle insurance
claims. If you would like further information, please ring our Helpline on
FSA - Financial Services Authority.
020 7892 7300.
FOS - Financial Ombudsman Service.
FSMA - Financial Services & Markets Act 2000, an There is a separate booklet covering deposits and investment claims.
Act of Parliament governing the regulation Please ask the Helpline for a copy.
and provision of financial products, product
providers and financial advisers.
FSCS was created under the Financial Services and Markets Act
2000 (FSMA) and became operational on 1 December 2001.
FSCS replaced the following compensation schemes:
• Building Societies Investor Protection Scheme
• Deposit Protection Scheme
• Friendly Societies Protection Scheme
• Investors Compensation Scheme
Where to contact us: • PIA Indemnity Scheme
Financial Services Compensation Scheme (FSCS) • Policyholders Protection Board
• Section 43 Scheme
7th Floor, Lloyds Chambers, 1 Portsoken Street, London E1 8BN and the arrangement between the Association of British Insurers and
Helpline: 020 7892 7300 Fax: 020 7892 7301 the Investors Compensation Scheme Ltd for paying pension review
compensation to widows, widowers and dependents of deceased
www.fscs.org.uk e-mail: enquiries@fscs.org.uk
persons.
4 Financial Services Compensation Scheme Financial Services Compensation Scheme 5
What the Scheme covers
Insurance Non-compulsory insurance (such as home, general)
Policyholders are eligible for protection if they are insured by authorised The first £2,000 of a claim is protected in full. For amounts above this
insurance companies under contracts of insurance issued in the UK, or in threshold FSCS will ensure that policyholders are compensated to 90%
some cases in the EEA, Channel Islands or Isle of Man. of the value that their policy would have paid.
Policyholder protection is triggered if an insurance company is unable
(or likely to be unable) to meet claims against it, for example if it has been
Long-term policies (such as pension plans, life assurance)
placed in provisional liquidation.
The first £2,000 of a claim is protected in full. Above this amount the
The Scheme will seek to take measures to safeguard policyholders,
Scheme covers payment to 90% of the value of a policy in a liquidation.
for example by trying to ensure that policies are transferred to another
If a policy is not due to be paid before the date of liquidation, FSCS must
company. If this is not possible, compensation may be payable.
try to arrange a transfer of the policy to another insurer or obtain a substitute
The level of protection depends on the type of insurance policy, as policy at 90% of the value. If this is not possible, the policyholder will
described here. receive compensation. The liquidator determines the value of the policy.
Re-insurance, marine, aviation, transport business, credit insurance and Deposits and investments
Lloyds policies are excluded. Also excluded are risks outside the EEA.
The Scheme also provides protection for deposits and investments. If you
would like more information, please contact our Helpline for a copy of our
booklet covering these sorts of claims.
Compulsory insurance
You can contact our Helpline on 020 7892 7300.
For compulsory insurance claims, the Scheme must ensure that the claims
of all policyholders are met in full. Compulsory insurance covered by the
Scheme include:
• Motor (third party, injury and property).
• Employers’ liability.
6 Financial Services Compensation Scheme Financial Services Compensation Scheme 7
Scheme rules: the main points Claiming compensation
We can only pay compensation when an authorised company is unable, or If an insurance company collapses, the liquidator or FSCS should contact
likely to be unable, to meet the claims against it. In general this is when a you to explain what is happening to your policy or claim.
company is insolvent or has gone out of business.
The policy may be transferred to another insurance company, or you will
receive compensation (if you are eligible under our rules). If it has not been
Your eligibility for compensation possible to transfer your policy, or otherwise to ensure that your cover will
continue, compensation will be paid.
To qualify for compensation you need to be eligible under our rules.
FSCS will seek to work with the company or its liquidator to ensure the
The main points are:
minimum delay in paying compensation. However, the liquidator must meet
• The Scheme was set up mainly to assist private individuals, although all several legal requirements and, if there is a large number of policyholders,
policyholders are covered for compulsory and long-term insurance some delay is likely.
policies.
The Scheme acts as a ‘safety net’ for consumers. Aside from compulsory
• Small businesses are covered for non-compulsory general insurance. insurances (such as third party motor insurance), compensation is unlikely
to cover your entire loss, although the first £2,000 of any claim is covered
• There are maximum levels of compensation you can receive (see page
in full.
10), and the Scheme may not cover your entire loss.
This is only a general guide. Our rules set out a full description of who we
can compensate and are part of the FSA’s Handbook. You can find this on
its website: www.fsa.gov.uk
Claims before 1 December 2001
If you have a claim against a company that was insolvent or declared in
default before FSCS became operational (1 December 2001), slightly
different rules apply (see page 10).
The claim is covered by the rules governing the separate compensation A separate booklet covers deposits and investments. For a
schemes that existed before that date (listed on page 5), although we will copy please ring our Helpline on 020 7892 7300.
still handle the claim.
8 Financial Services Compensation Scheme Financial Services Compensation Scheme 9
Receiving compensation Complaints
To receive compensation, you will first Compensation limits What can I do if I’m unhappy with the Scheme’s decision on
need to accept and sign our offer my claim?
The maximum levels of
document, including an ‘assignment of
compensation you can receive In some instances we cannot pay compensation, or we may not be able to
rights’.
from the Scheme are: compensate you fully for your losses. If this happens, we will write to
This gives us the right to reclaim from explain why.
• Long-term insurance
the company (if it has any money left),
If you are not satisfied with our explanation, you can ask that your claim be
the amount we have paid you in (such as pensions and life
reviewed by senior management and ultimately by the Chief Executive.
compensation. If others are also assurance):
A copy of our review procedure is available on request.
responsible for your losses, the
100% of the first £2,000 plus
assignment of rights can help us claim
90% of the rest of the claim.
back money from them as well.
What can I do if I’m unhappy with the way the Scheme handled
• General insurance:
Policyholders Protection Board my claim?
- compulsory insurance
Claims being handled by the You can contact us if you are not happy with the way we handled your
(such as third-party motor
Policyholders Protection Board (PPB) claim. We have a formal complaints procedure with a number of stages.
insurance): 100% of
were transferred to FSCS on These include a review of the case by senior management, the Chief
the claim,
1 December 2001. FSCS has taken Executive and ultimately an Independent Investigator, if necessary.
over the handling of these claims. - non-compulsory
A copy of our complaints procedure is available on request.
insurance (such as home,
PPB rules continue to apply to any
general):
claim arising from the insolvency of an
100% of the first £2,000 plus
insurance company where it occurred
90% of the rest of the claim.
before 1 December 2001, or for
policies written before that date.
This affects claims for non-compulsory
general insurance:
• Partnerships are covered, small s The actual level of
companies are not. compensation you receive
will depend on the basis of
• The compensation limit is 90%
your claim.
of the claim.
10 Financial Services Compensation Scheme Financial Services Compensation Scheme 11
Frequently asked questions and answers
Q. I have just paid a premium on my life policy. What do I do?
Q. What will happen about my outstanding claim for damage to my car? A. You should keep the position under close review, in the light of what the
A. The first £2,000 of a claim is covered in full. We will pay 90% of the liquidator tells you. Ask your broker for advice.
remainder of the claim.
Q. Can I get compensation if the value of my life or pension policy goes
down?
Q. My car has just been repaired but the garage will not release it without
A. We cannot pay you compensation just because stock market falls have
payment. What can I do?
caused your investment to go down in value, or if inflation lowers the
A. FSCS will seek to work with the liquidator to ensure that outstanding
real value of your investment or policy. If the company fails we may pay
claims are processed as quickly as possible. If you decide to pay the
compensation. You might also be eligible for compensation from us if
repairer yourself, your claim for compensation will still be valid (if you
you believe you were mis-sold the policy by a financial adviser who is
are eligible under our rules). You should ensure that the repairer gives
no longer in business.
you a detailed receipt.
Q. Does compensation cover any guarantees I was given?
Q. What will happen about my outstanding claim for damage to another A. The fact that the future returns on an investment or policy were described
person’s property or injury to a third party? as ‘guaranteed’ does not mean we can pay you compensation equal to
A. If the Road Traffic Act requires it, we will pay the full amount of damages the return you were promised.
and costs for third-party personal injury, and the first £250,000 for
third-party property damage. Q. Can you compensate companies as well as people?
A. The Scheme was set up mainly to help private customers of authorised
companies. We can also compensate small businesses and some trusts
Q. I have just renewed my home insurance. Do I have to buy cover from that have lost money. We do not pay compensation to large companies
another insurer? Will I get compensation for the cost of my original policy? or large partnerships, except for compulsory and long-term insurance.
A. To ensure continued full protection, you should buy cover from another Our rules set out a full description of who we can compensate and are
insurer unless you have been informed that the policy has been part of the FSA’s Handbook. You can find this on its website:
transferred. Ask your broker for advice. If the policy has not been www.fsa.gov.uk
transferred, your existing policy will be cancelled by the provisional
liquidator. The Scheme will cover the whole of the first £2,000 of the Q. Will I be covered if I did business through the Internet?
value of your unused premiums. Above this amount, 90% will be covered. A. We may be able to help if the company you dealt with is authorised
in the UK.
12 Financial Services Compensation Scheme Financial Services Compensation Scheme 13
Other organisations that can help
The regulator The ombudsman
The Financial Services Authority (FSA) is the If a company is still trading you should
UK’s financial regulator. On 1 December 2001 complain directly to it. If you are not happy
it took over responsibility for regulation from with how it deals with your claim, and you
the following: have exhausted its complaints procedures,
• Bank of England (in respect of deposits you should contact the Financial Ombudsman
and investments) Service (FOS). On 1 December 2001 the FOS
took over from the following bodies:
• Building Societies Commission
• Friendly Societies Commission (in • The Banking Ombudsman
respect of insurance business)
• Building Societies’ Ombudsman
• Insurance Directorate (HM Treasury)
• Insurance Ombudsman Bureau
• Investment Management Regulatory
• Investment Ombudsman
Organisation (IMRO)
• PIA Ombudsman
• Personal Investment Authority (PIA)
• SFA Complaints Bureau
• Securities and Futures Authority (SFA)
• SIB Complaints Service
• Securities and Investments Board (SIB)
• Personal Insurance Arbitration Service
You can telephone the FSA’s Consumer
Helpline to find out about the status of a
company. Contact
Financial Ombudsman Service
Contact South Quay Plaza, 183 Marsh Wall
Financial Services Authority London E14 9SR
25 The North Colonnade Telephone: 0845 080 1800
Canary Wharf, London E14 5HS Fax: 020 7964 1001
Consumer Helpline: 0845 606 1234 enquiries@financial-ombudsman.org.uk
Fax: 020 7676 9713 www.financial-ombudsman.org.uk
consumerhelp@fsa.gov.uk
www.fsa.gov.uk/consumer
14 Financial Services Compensation Scheme Financial Services Compensation Scheme 15
