Partially upheld: unfair claim settlement calculation due to underinsurance; poor customer service and expectation management complaint against Zurich Insurance Company Ltd
Financial Ombudsman decision DRN-6402431 of 2026-06-04T00:00:00+00:00. unfair claim settlement calculation due to underinsurance; poor customer service and expectation management complaint against Zurich Insurance Company Ltd. Outcome: Partially upheld.
Decision detail
| Reference | DRN-6402431 |
|---|---|
| Decision date | 2026-06-04T00:00:00+00:00 |
| Firm | Zurich Insurance Company Ltd |
| Product | Home insurance |
| Claim type | unfair claim settlement calculation due to underinsurance; poor customer service and expectation management |
| Outcome | Partially upheld |
| Remedy | Zurich Insurance Company Ltd must: (1) Recalculate and pay the claim settlement using the total value of the jewellery of £51,285.49, less any single article limits, then multiply by 59%; (2) Pay Mr and Mrs T £500 in settlement of the stolen money; (3) Pay Mr and Mrs T £150 for distress and inconvenience caused. |
Summary
Mr and Mrs T claimed on their contents insurance policy after jewellery and cash were stolen from their home. The stolen jewellery was valued at £51,285.49, but their policy only covered £30,000 of valuables, meaning they were underinsured at 59%. Zurich initially offered to settle the full £30,000 plus £500 for cash, but reversed this decision a week later and offered only £16,904.10 based on proportionate underinsurance settlement. The ombudsman found that while proportionate settlement was justified by the policy terms, Zurich's calculation was unfair because it applied the 59% deduction to replacement costs rather than the actual claim value. The ombudsman ordered Zurich to recalculate using the £51,285.49 claim value, pay the £500 cash settlement separately, and pay £150 compensation for poor customer service and distress caused by reversed expectations.
The Ombudsman's reasoning
The ombudsman found that Zurich was entitled to apply a proportionate settlement due to underinsurance, as this was clearly stated in the policy terms. However, the calculation method was unfair because Zurich used the loss assessor's replacement costs (£28,651.02) rather than the actual claim value (£51,285.49) as the basis for applying the 59% underinsurance deduction. The ombudsman reasoned that the underinsurance percentage should be applied to the actual loss value to treat the customer fairly. Additionally, the £500 cash settlement should be paid separately as it falls under a different policy section not subject to the valuables underinsurance calculation. The ombudsman also found that Zurich's poor management of expectations (offering full settlement then reversing it a week later) and insensitive handling of cultural concerns about diamond replacements caused distress warranting compensation.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Zurich Insurance Company Ltd, all decisions | 184 | 23% |
| Home insurance, all decisions | 20,668 | 38% |
Source
Read the original decision on the Financial Ombudsman Service website