Upheld: Travel / life insurance claim disputes complaint against Arch Insurance (UK) Limited

Decision detail

Summary

Mr D claimed on his personal income protection insurance policy after suffering an injury in June 2025. Arch accepted the claim but calculated his monthly benefit at £944.28 based on annual profits, rather than the £1,787 monthly benefit he had selected, arguing he was overinsured. Mr D disputed this, contending that benefit should be calculated based on his annual turnover (gross income). The ombudsman upheld the complaint, finding that 'gross income' in ordinary usage means turnover before deductions, not profits, and that the policy terms were ambiguous and should be interpreted in Mr D's favour. Arch was directed to recalculate benefit using the 2024-2025 turnover figure of £30,374, pay the difference owed with 8% interest, deduct refunded premiums, and pay £250 compensation.

The Ombudsman's reasoning

The policy terms define 'Normal Monthly Income' for self-employed persons as 'the monthly average of the gross income You declared to HM Revenue and Customs for the previous tax year.' The contract does not define 'gross income' explicitly. Applying the plain and ordinary meaning of 'gross income' and HMRC's own definition, gross income for a self-employed person refers to annual turnover (income before expenses), not annual profits. The contract terms are ambiguous on this point and should be interpreted in Mr D's favour under the contra proferentum principle, as Arch drafted the policy and should have been clear if it intended to use profits rather than turnover. Therefore, Arch should have calculated benefit based on the 2024-2025 turnover of £30,374, not the profit figure it used.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website