Not upheld: policy cancellation for non-payment; payment allocation and charges; communication and complaint handling complaint against Marshmallow Insurance Limited

Decision detail

Summary

Mr B complained that Marshmallow Insurance Limited unfairly cancelled his motor insurance policy for non-payment of a premium instalment, claiming he had paid before the cancellation took effect. Mr B had a history of late and missed payments throughout the policy term, and Marshmallow had extended the payment deadline from 15 July to 11:00 a.m. on 29 July 2025 with clear warnings. Mr B made payment at 8:23 p.m. on 29 July, after the deadline, and the policy was cancelled at 11:00 a.m. that day. The ombudsman found that Marshmallow provided fair warning, had already been flexible with previous late payments, and acted reasonably in cancelling the policy according to their commercial procedures and policy terms. The ombudsman noted that Marshmallow later waived the outstanding balance and charges after Mr B disclosed financial difficulties in late August 2025.

The Ombudsman's reasoning

The ombudsman found that Marshmallow provided clear and repeated warnings about the 11:00 a.m. payment deadline on 29 July 2025, had already extended the original due date by two weeks, and had a documented history of accommodating Mr B's late payments with grace periods. The policy terms permitted cancellation for non-payment. Although Mr B's system accepted payment after 11:00 a.m., the payment deadline was a commercial decision for Marshmallow and the policy had been cancelled before payment was received. The ombudsman noted that Marshmallow's practice of allowing cover to continue until 11:59 p.m. was reasonable industry practice. The ombudsman also found that Marshmallow's allocation of the payment and charges were permitted under the policy terms and properly explained, and that waiving the outstanding balance and fees after Mr B disclosed financial difficulties was fair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website