Insurers not concerned over upholding of £100,000 cap on compensation claims
Insurers have played down the significance of a High Court ruling that could stop the Financial Ombudsman Service from enforcing compensation claims above £100,000.
Under the judgment the ombudsman will no longer have the power to force companies to pay compensation that exceeds the monetary limit, as specified in the Financial Services and Markets Act (FSMA) 2000.
Philip Ryley, head of financial services and markets at law firm Michelmores, said the ruling could save insurers a significant amount of money in additional compensation costs.
“In terms of policies where significant sums of money are paid out then I am sure it will affect general insurers,” he said.
But, insurers have dismissed the significance of the ruling claiming that 90% of complaints that come before the ombudsman are found in favour of the insurer. The remaining complaints are settled far below the £100,000 cap.
A spokesman for Norwich Union, said: “Insurance companies are very keen to make sure that anything that goes before the ombudsman is a water tight case, so very few are found against the insurer.
“There are very few examples of cases that exceed £10,000 let alone £100,000. So, I don’t think insurers will be particularly concerned by this ruling.”
A Zurich spokesman added: “The £100,000 limit is a level that has always been there and it is not one that [Zurich] has got close to.”
Under the FSMA, where the Financial Ombudsman Service upholds a complaint and makes a money award, the ombudsman “may not exceed the monetary limit; but the ombudsman may, if he considers that fair compensation requires payment of a larger amount, recommend that the respondent pay the claimant the balance”.
However, the High Court has now concluded that the ombudsman does not have the jurisdiction to award a money payment or direct a firm to make a payment that exceeds the statutory cap of £100,000.