Are your insurance cancellation terms clear?

BISL Ltd, a car and motorbike insurer, has given an undertaking relating to the cancellation terms in its insurance policies, after the Financial Services Authority — now the Financial Conduct Authority — found the terms to be unfair.

The offending term concerned how BISL would calculate refunds if a policyholder cancelled his or her policy, and the situations in which BISL could cancel a policy and keep the premium. The term read: ‘Thereafter refunds will only be given if no incident has occurred that has led to a claim, or may yet lead to a claim against the policy and calculated as follows. If you or we cancel within 12 months of the policy start date, we will calculate the premium for the period of cover based on our short period rates in force when we receive the Certificate of Motor Insurance and refund any excess premium you have paid.’

Under Regulation 5 of the Unfair Terms in Consumer Contracts Regulations 1999, terms are regarded as unfair if, contrary to the requirement of good faith, they cause a significant imbalance in the parties’ rights and obligations under the contract, which harms the consumer…

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