Rules that will force insurance companies to act in the “best interests” of their customers could help protect people from accidentally buying policies they do not want or need.
The City regulator has completed a consultation into the EU’s “insurance distribution directive” and will publish its proposals in the autumn. The EU has ruled that all countries must implement changes by February, with the British version due to come into force on February 23.
The changes could help protect potential customers from being misled or confused by the cover they are getting.
Royston Lewis, 82, has been paying £9 every month to insure a washing machine and dryer that he bought almost a decade ago and has not used for almost seven years.
Mr Lewis, who lives in South Wales, bought the machines from Currys in 2008 with his late wife and said he had signed up for the insurance cover without his knowledge. His wife, a former accountant, dealt with the couple’s finances and he did not notice the monthly payments until last year.
“I paid the full amount and as far as I was concerned that was the end of it,” he said. “We never had a single service at all.”
A spokesman for Currys said the company would cancel Mr Lewis’s policy and refund the payments he had made since he contacted Your Money, but insisted that he had been provided with a service – whether or not he was aware of it.
Mr Lewis, who spent his career working on the railways, said he was offered a year’s interest-free credit on the £684 cost of the appliances, which he paid off in full in October 2009, and was unaware that he also had the insurance policy.
He added: “We have not signed up for any insurance – we have brought two items from them, paid the full cash amount to them and not agreed to pay anything extra to them.” But he added that he felt “a little bit of an idiot that I’ve not done anything sooner”.
“I’m not a silly man but I thought the payments were for something else and I just didn’t know,” he said.
“It was an oversight on my part but it could be an expensive one. I thought all I would need to do was get in touch and I would get a refund. There’s no doubt in my mind that they owe me this money back.”
In total Mr Lewis has spent almost £1,000 on the unwanted policy.
The Currys spokesman said: “Mr and Mrs Lewis took out care plans on two separate appliances they bought in 2008 and still own and have been paying a monthly direct debit for those care plans all the time they’ve had those appliances.
“Mr Lewis contacted The Daily Telegraph and stated that he had no idea that he was paying for the care plans and wished to stop them. He is free to do so and can cancel his direct debit at any time.”
Consumer expert James Daley of Fairer Finance said the implementation of the new insurance law in February would be relevant for this kind of case.
“These extended warranties are thankfully much less prevalent than they used to be,” he said. “There was an inquiry that stopped providers selling them at the point of sale, which is what happened here. The problem with these policies is that generally just as you need them, they expire.
“With products like TVs, basically these things don’t break down any more; they are so good that extended warranties are useless.”
He added: “The new rules say that insurers will have to act in their customers’ best interests. Obviously we will see how the regulator enacts it, but if you know you are overcharging for insurance you can’t really claim you’re acting in your customer’s best interest.”
Unwittingly entering into complicated insurance cover could be more prevalent among older consumers. Simon Bottery, a director at the charity Independent Age, said companies should not be relying on the “inertia” of customers.
“Older people, especially those over the age of 75, may be more prone to being vulnerable to these sorts of schemes, as they’re less likely to have internet access and therefore may find it harder to shop around for a better deal or cancel a policy,” he said.
“We would advise people of all ages to keep an eye on payments being taken out of their bank account and phone the company to find out what it’s for if you’re not sure.”
For more information on the changes to IDD click here. A policy statement will be published in September.