Insurers close door on small claims: Householders are being discouraged from making frequent claims, reports Maria Scott

Householders should now think twice before claiming on household insurance policies for small losses because they may be refused cover in future.

Insurers are becoming reluctant to cover people who have a record of frequent claims, especially for theft. People who have a history of claims, even for perfectly legitimate losses, will find it difficult to obtain competitive prices on their policies.

Rod Young, director of personal insurance at Legal & General, said this week: 'If you have had a number of claims your best bet is to stay with your current insurer.'

Another insurance industry insider said: 'I would not want to admit that people should not claim because that is what insurance is supposed to be all about. But it probably is good advice for them to think twice before claiming for small losses.'

Gerry Coquet, an assistant manager at Sun Alliance, said: 'We would look at proposals from people with a claims history. But we may attach certain conditions to the policy and charge for the privilege.'

L&G, which has about 200,000 contents policyholders, is likely to introduce no-claims bonuses on its household contents policies shortly in an effort to control the cost of claims and keep premium increases down.

Only a few insurers, including AA Insurance, offer these discounts at present. L&G put premiums up by more than 50 per cent last year for cover in some areas. Mr Young said early indications were that burglary claims over Christmas were running at a high level, so the outlook for premiums this year may be dismal.

He said inner London and other large inner city centres were still black spots for insurers although claims were also rising in outer city suburbs.

Figures from the Association of British Insurers show that theft claims on contents policies were running at pounds 2m a day in the first quarter of 1992. In the year to June 1992 the industry paid out pounds 712.8m in theft claims, nearly 60 per cent more than in the previous year.

L&G is considering no-claims discounts after disappointing results from another experiment aimed at controlling premiums. This required people to pay the first pounds 250 of their losses from a theft unless they had certain locks on their houses.

When applying for new insurance, policyholders are being asked to give details of claims in the past few years. If they try to cover up they may not be paid when they claim from their new insurer. The insurance industry does not keep a blacklist, but companies may consult each other about an applicant's past.

Chris Wallage, general insurance marketing development manager at Abbey National, which now has 200,000 policyholders on its books, said he expected the bank's insurance scheme to start refusing to renew cover for policyholders who had claimed too frequently. 'We have never done that before and it is a serious step, one we would not take lightly,' he said.

AA Insurance has launched a special scheme this month for people who have had difficulty obtaining cover. This offers policies underwritten by GAN Minster. Premiums will depend on the policyholder's claims history and the policy may exclude cover for certain risks, such as theft. Excesses - the amount of a claim that the insurer will not pay - are also likely to be high.

Many insurers now insist that houses in inner-city areas have certain locks. Typically these include a five-lever mortice deadlock made to British Standard 3621 on the main door and key-operated locks on accessible windows.

However, companies' requirements vary and the ABI is attempting to establish an industry- wide standard.

From this month Sun Alliance is insisting that even existing policyholders in high-risk areas must fit certain locks before they can be covered for theft. It says it will write to policyholders to warn them about the requirement.

A recent BBC Watchdog programme highlighted the apparent ignorance among many householders of security conditions attached to their policies that expose them to the risk that claims for theft would not be paid out if they did not have appropriate locks.

Householders will also find it harder this year to buy policies that set cover according to the number of bedrooms in a house, which means policyholders do not need to carry out a tedious inventory of the value of their contents as they did with traditional 'sum- assured properties.'

Claims have been even higher on bedroom-rated policies than other types, prompting companies to start taking these schemes off the market.

(Photograph omitted)