esure Insurance Limited

esure Insurance Limited has agreed to change two of the terms and conditions in its home
insurance and car insurance policies.

esure has given us an undertaking1 in relation to its cancellation terms. This is because we had
concerns that the terms were likely to be unfair under the Unfair Terms in Consumer Contracts
Regulations 1999 (the Regulations); we felt that the terms gave the firm too much discretion
to cancel a customer’s insurance policy.

esure has also acknowledged that its automatic renewal terms were unclear.

We summarise our concerns and the action that the firm has taken below.

Cancellation terms

Why did we think the terms were unfair?

esure’s policy documents contained cancellation terms that allowed it to cancel a consumer's
home or car insurance policy at any time, with seven days’ notice in writing, without the firm
having to explain why it had done this. The policy documents only specified customers missing
a premium payment as grounds for a potential cancellation. Also, both policies contained terms
that allowed the firm to cancel the policy and charge an administration fee if a customer
missed a premium payment, irrespective of why this had happened.

In our view these terms meant that without good reason consumers could be left uninsured
and perhaps find it difficult to arrange insurance elsewhere following a potentially unjustified
cancellation.

We also considered that, in situations where a consumer's direct debit may fail for reasons
outside their control, it would be disproportionate to cancel the policy if the consumer could
easily rectify the situation if given the chance.

1 If we consider a contract term to be unfair under the Unfair Terms in Consumer Contracts
Regulations 1999, we can ask a firm to give us an ‘undertaking’ that it will stop using the term
in its contracts.

How has the firm responded to our concerns?

The firm has explained to us that the cancellation term was generally only used when a
customer missed a payment, or failed to provide evidence of a no-claims record. In these
cases the firm would contact the customer and give them more than seven days to resolve the
matter. The firm has told us that the use of the term otherwise arose only in exceptional
circumstances as a result of customers behaving inappropriately (e.g. where there is a
reasonable suspicion of fraud).

esure has agreed to change its cancellation terms in order to:

•
restrict the firm's discretion to cancel policies for 'valid' reasons. Its new term sets out
examples of the ‘valid’ reasons it may rely on; and

•
clarify the process the firm follows in practice when cancelling policies. As part of this
process, esure gives consumers the opportunity to take action to address its concerns.

These changes will be in place for new policies from 3 November 2013.

Automatic renewal terms

In addition to the above undertaking, esure has acknowledged that its automatic renewal
terms were unclear.

Why did we think the terms were unclear?

The firm’s automatic renewal terms suggested that esure could renew a customer’s home or
car insurance policy with a different insurer. We considered that this could cause confusion, as
consumers would generally expect ‘renewal’ to mean continuing with the same insurer.

How has the firm responded to our concerns?

The firm explained that it had not relied on this renewal term in any way.

For car insurance policies entered into on or after 27th January 2013 and home insurance
policies entered into on or after 14th April 2013, esure has deleted the term relating to
automatic renewal with different insurers.

How does this affect existing customers?

For both the cancellation terms and automatic renewal terms the firm has also agreed to:

•
treat existing customers as if the new terms applied to their home and car insurance
policies; and

•
write to existing customers when their home or car insurance policy is up for renewal to tell
them about the new terms.

esure has clarified the wording of cancellation terms in recently issued policies. The firm will,
however, treat all customers as being subject to the new terms set out in this Notice of
Undertaking.

Name of
business
esure Insurance Limited
Lead
organisation
FCA

Trading
sector
Insurance
Contract
identifier
Terms and Conditions for:

•
Home insurance; and

•
Car insurance.

Original term

Home insurance terms and conditions:

“Cancelling your policy

c) we have the right to cancel your policy at any time by giving you seven days’ notice
in writing. We will send our letter to the latest address we have for you.

d) if you are paying by installments and you miss a payment, we may cancel your
policy. We will give you seven days’ notice in writing before we do this as set out in
paragraph (c) above. You will still have to pay any outstanding premium and any
administration fees due to us and we may take any outstanding premium and any
administration fees due to us from any claim payment we make to you”

Car insurance terms and conditions:

“11. Cancelling your policy

We also have a right to cancel your policy at any time by giving you seven days' notice
in writing. We will send our letter to the latest address we have for you. If we do
cancel your policy, we will refund the part of your premium you have not yet used less
an administration fee to take into account of our costs in providing your policy. The
fees are detailed in your schedule. If you or we cancel your motor insurance at any
time, we will automatically cancel any motoring legal protection or breakdown
assistance cover purchased with it.

If we cancel your policy because we have been unable to collect the premium by direct
debit installments, we may charge an administration fee to take account of our costs in
providing your policy and for recovering any premium owed to us for the period of
cover. The fees are detailed in your schedule.”

Applying the Regulations

Regulation 5(1) provides that a contractual term that has not been individually
negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it
causes a significant imbalance in the parties' rights and obligations, to the detriment of
the consumer.

There are two dimensions to the cancellation terms that caused us concern:

1. both policies contained terms that allowed the firm to cancel the consumer's
policy at any time on seven days' notice in writing, without providing any valid
reasons for doing so (only missing a premium payment was mentioned as a
potential reason for cancellation); and

2. both policies contained terms that allowed the firm to cancel the policy and
charge an administration fee in the event of a missed premium installment,
irrespective of the reason as to why the customer missed the installment.

In our view, the terms had the potential to cause detriment to consumers, as they
could be left uninsured and facing significant difficulties to arrange insurance elsewhere
following a potentially unjustified cancellation.

Regarding the missed premium installment terms we considered that, for example, in
situations where a consumer's direct debit may fail for reasons outside the consumer's
control, the firm could still rely on the term to cancel the policy, which in our view was
a disproportionate measure in circumstances which the consumer could easily rectify if
given the chance.

In our view, the original cancellation terms had the potential to be contrary to the
requirement of good faith and cause a significant imbalance to the detriment of the
consumer. Therefore we believe that the original terms were likely to be unfair under
the Regulations.

How the term has changed

The firm has explained to us that the cancellation term was generally only used when a
customer missed a payment, or failed to provide evidence of a no claims discount. In
these cases the firm would contact the customer and give them more than 7 days to
resolve the matter. The firm has told us that the use of the term otherwise arose only
in exceptional circumstances as a result of customers behaving inappropriately (e.g.
where there is a reasonable suspicion of fraud etc.).

The firm has therefore agreed to amend the original cancellation terms in order to:

•
restrict the firm's discretion to cancel the policies to 'valid reasons', including
examples of what may be considered a valid reason; and

•
clarify the firm’s process for cancelling the policies, including giving consumers the
opportunity to rectify issues in some circumstances.

These changes will be in place for new policies from 3 November 2013.

New term

Home insurance terms and conditions:

“Cancellation of your home Policy

All administration fees which include fees for the cancellation and changing of your
policy details are specified in your Schedule.

c) We have the right to cancel your Policy at any time by giving You seven days' notice
in writing where there is a valid reason for doing so. We will send our cancellation
letter to the latest address We have for You and will set out the reason for cancellation
in our letter. Valid reasons may include but are not limited to:

•
Where We have been unable to collect a premium payment. In this case We will
contact you in writing requesting payment by a specific date. If We do not
receive payment by this date We will write to You again notifying You that
payment has not been received and giving You 7 days' notice of a final date for
payment. This letter will also notify You that if payment is not received by this
date your Policy will be cancelled. If payment is not received by that date We
will cancel your Policy with immediate effect and notify You in writing that such
cancellation has taken place;

•
Where You are required in accordance with the terms of this Policy Booklet to
co-operate with us, or send us information or documentation and You fail to do
so in a way that materially affects our ability to process a claim, or our ability to
defend our interests. In this case We may issue a cancellation letter and We will
cancel your Policy if You fail to co-operate with us or provide the required
information or documentation by the end of the seven day cancellation notice
period;

•
Where there is a material failure by You to exercise the duty of care regarding
your property as required by the paragraph headed 'Your duty of care' in the
General Conditions section applying to Parts A to D of this Policy Booklet;

•
Where We reasonably suspect fraud; or

•
Use of threatening or abusive behaviour or language, or intimidation or bullying
of our staff or suppliers.”

Car insurance terms and conditions:

“Our right to cancel your policy

We have the right to cancel your policy at any time by giving you seven days' notice in
writing where there is a valid reason for doing so. We will send our cancellation letter
to the latest address we have for you and will set out the reason for cancellation in our
letter. Valid reasons may include but are not limited to:

•
Where we have been unable to collect a premium payment. In this case we will
contact you in writing requesting payment by a specific date. If we do not
receive payment by this date we will write to you again notifying you that
payment has not been received and giving you 7 days' notice of a final date for
payment. This letter will also notify you that if payment is not received by this
date your Policy will be cancelled. If payment is not received by that date we
will cancel your Policy with immediate effect and notify you in writing that such
cancellation has taken place;

•
Where you are required in accordance with the terms of this Policy Booklet to
co-operate with us, or send us information or documentation and you fail to do
so in a way that materially affects our ability to process a claim, or our ability to
defend our interests. In this case we may issue a cancellation letter and we will
cancel your policy if you fail to co-operate with us or provide the required
information or documentation by the end of the seven day cancellation notice
period;

•
Where we do not receive evidence of your no claim discount within 21 days
from the start date of the policy. If we have not received such evidence by the
end of the 21 day period we will issue a cancellation letter and we will cancel
your policy if we do not receive evidence of your no claim discount by the end
of the seven day cancellation notice period;

•
Where there is a material failure by you to take care of your car as required by
the paragraph headed 'Taking care of your car' in the General Conditions
section applying to Sections 1 to 7 of this Policy Booklet;

•
Where we reasonably suspect fraud; or

•
Use of threatening or abusive behaviour or language, or intimidation or bullying
of our staff or suppliers.

If we do cancel your policy, we will refund the part of your premium you have not yet
used less a cancellation fee to take into account our costs in providing your policy. The
fees are detailed in your Schedule.

If we cancel your motor insurance at any time, we will automatically cancel any cover
provided by the additional services and benefits you chose with your main policy cover.
The premium you have paid for these additional services and benefits will also be
refunded less a pro rata charge for the time you have been on cover.

If we cancel your policy because we have been unable to collect the premium by direct
debit instalments, we will charge the cancellation fee to take account of our costs in
providing your policy and for recovering any premium owed to us for the period of
cover. The fees are detailed in your Schedule.”

In addition to the above undertaking, esure have also acknowledged that their automatic
renewal term was not in plain and intelligible language.

Original term

Home insurance and car insurance terms and conditions:

“Renewal information

...

If we are unable to offer you a policy we will let you know and you may be provided
with details of the terms (including any changes to existing terms) on which your
cover will continue via another insurer. By taking out this policy you agree that your
data may be used to allow an alternative insurer to provide you with these terms
before your existing policy expires.”

Applying the Regulations

Regulation 7 of the Regulations provides that firms should ensure that terms are
expressed in plain, intelligible language.

We considered that the above term was not drafted in plain, intelligible language in
line with Regulation 7. This is because it provided that the firm could 'renew' a
consumer's policy with a different insurer, which we felt could cause confusion to
consumers. We considered that consumers would generally expect to ‘renew' with the
same insurer, rather than with an alternative provider. Therefore describing such a
process as 'renewal' did not seem to be in plain, intelligible language in line with the

Regulations.

How the term has changed

The firm has deleted this term from its car insurance terms and conditions entered into
on or after 27 January 2013 and its home insurance terms and conditions entered into
on or after 14 April 2013.

In any event, the firm has informed us that the term was never invoked to
automatically renew a consumer’s policy with another insurer.

New term

Other information

The firm has told us that it has not relied on the potentially unfair aspect(s) of the
cancellation terms or the potentially unclear aspect of the automatic renewal terms.

esure has also agreed to take the following steps to reduce potential consumer
detriment arising from the original terms indicated above, including:

•
agreeing to treat existing consumers as if the new terms applied to their
policies; and

•
communicating the new terms to existing consumers as part of the consumers'
renewal process.

esure's policy wording is used under the following trading names, which are also
affected by the changes above: esure, Sheila's Wheels, Sainsbury’s Car Insurance and
First Alternative.

The firm was fully cooperative in providing this undertaking.

Undertaking published on 24 September 2013

Legal information

As a qualifying body, we, the Financial Conduct Authority (FCA), can challenge firms using
terms that we view as unfair under the Unfair Terms in Consumer Contracts Regulations 1999
(the Regulations). We review contract terms that we come across in our supervision of firms
that are referred to us by consumers, enforcement bodies and consumer organisations. This
has led to esure Insurance Limited undertaking to replace the terms that we consider are likely
to be unfair.

We have a duty under the Regulations to notify the Office of Fair Trading (OFT) of the
undertakings we receive. The OFT has a duty to publish details of these undertakings, which it
puts on its Consumer Regulation website. We also publish the undertakings on our website.
Both publications will name the firm and identify the specific term and the part of the
Regulations that relate to the term’s fairness.

Even if firms have not given an undertaking or been subject to a court decision under the
Regulations, they should remain alert to undertakings or court decisions concerning other firms
as part of their risk management. These will be of potential value in showing the likely attitude
of the courts, the FCA, the OFT or other qualifying bodies to similar terms or terms with a
similar effect.

Ultimately only a court can determine the fairness of a term and, therefore, we do not
recommend terms that have been revised by a firm to address our concerns as being definitely
fair. We cannot approve terms for the purposes of the Regulations; it is for firms to assess the
fairness of their terms and conditions under the Regulations and in the context of the product
or service in question.

It is important to bear in mind that wording that is fair in one particular agreement is not
necessarily fair in another. Where we accept an undertaking given to us from a firm to revise a
term, this means that, on the evidence currently available, we consider the term to be
improved enough so that further regulatory action is not required.