Felt like 'house arrest' after insurer cancelled car, house and contents insurance

Narayan Subramanian says he was shocked to have his insurance policies cancelled. Photo / Supplied

An Auckland man says he was left fearing he would lose his home after his insurer cancelled his policies without telling him why leaving him struggling to find another company to provide cover.

But IAG New Zealand says it cancelled the policies because the relationship between it and the man "broke down to a level where we no longer felt comfortable retaining him as a customer" and it informed him by phone and letter.

Narayan Subramanian says the first he knew of his car, house and contents policies being cancelled was in July last year when he received a letter from his bank - BNZ - warning him that if he did not get new insurance cover he would be in breach of his mortgage contract.

The BNZ letter arrived two days before his cover was due to be cancelled.

"I had lost words. I rang the Citizens Advice Bureau thinking they were going to take away my house."

Subramanian, who had been insured through IAG via his bank for 17 years for his car and 10 years for his house and contents, said he was up to date on his premium payments and had no warning of the cancellation.

"They [IAG] should have sent me a letter in July which I never received."

But Phil Barclay, general manager business partnerships at IAG, said it had advised Subramanian of the relationship breakdown over the phone and said the man accepted the insurer's response.

"We also sent a follow-up letter advising of our decision."

Subramanian complained to the Insurance and Savings Ombudsman but says he was told earlier this month no resolution was possible.

To date Subramanian said he had never received an explanation for why his insurance was terminated.

Barclay said policies may be cancelled, by either party, at any time for a variety of reasons including non-disclosure, non-payment or the customer no longer wanting the policy.

Subramanian said he understood there was a clause that allowed either party to terminate the agreement.

But not knowing the reason had made it tougher for him to apply for insurance elsewhere.

"Obviously that led to a lot of assumptions."

He tried to get cover through AMI but was told it could not cover him because it was also owned by IAG and was also refused cover by AA Insurance which is jointly owned by Vero and the Automobile Association.

He finally got insurance through AMP, after spending a month without cover in which he felt like he was under "house arrest" because he couldn't drive his car anywhere.

"It's basically a case where an individual has been crushed by an organisation."

Subramanian said he wanted to talk about his case to warn others.

"The frustration, angst and stress I have been through over the last several months in the matter are unjustified.

"This not something that any citizen must endure. In my opinion, any policy holder irrespective of the type of policy could have the same or similar experience anywhere in the world, especially in New Zealand. This is just not acceptable."

Barclay said it strongly recommended customers read through their policy to ensure they were aware of the terms of their agreement with their insurer.

Karen Stevens, Insurance & Financial Services Ombudsman said most house, contents and vehicle policies allowed the insurer to cancel a policy if the correct notice was provided to the customer.

"These policies are also only for a year so insurers can also decide not to offer to renew the policy.

"In both cases, the insurer does not need to give the customer a reason for cancelling the policy."

Stevens said the decision whether to continue to offer cover to a customer was a business decision by the insurer.

"Insurers are not required to offer insurance cover to everyone."