Rejected Insurance Claims: How to Challenge a Refusal

If an insurer has rejected your claim, you are not out of options. Ask for the decision in writing, check it against your actual policy wording and the Insurance Act 2015, then make a formal complaint. If the insurer’s final response still declines, you can escalate free of charge to the Financial Ombudsman Service, which can order awards of up to £455,000 in 2026.

A declined claim feels final, but in UK law it rarely is. Insurers must handle claims fairly under FCA rules, and the legal grounds they rely on — non-disclosure, breach of condition, exclusions, late notification — are all open to challenge. Many rejections are overturned simply because the policyholder pushed back with evidence and the right statutory arguments.

This guide explains why claims are rejected, what duties your insurer actually owes you, and a clear step-by-step route from decline letter to complaint, Ombudsman, and (where necessary) court — with verified 2026 figures throughout.

Common reasons claims are rejected

Insurers rarely decline a claim “just because”. They must point to a specific contractual or statutory basis. Understanding which one they are relying on is the first step to challenging it, because each ground has its own legal test — and several have been substantially reformed in the policyholder’s favour over the last decade.

Non-disclosure and misrepresentation

This is the most common reason, and the area where the law has changed most. For consumer policies, the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA) replaced the old duty to volunteer information with a duty only to take reasonable care not to make a misrepresentation when answering the insurer’s questions. If your answer was honest and reasonable, the insurer cannot decline on this ground. Where there was a “qualifying misrepresentation”, the remedy depends on whether it was careless or deliberate/reckless.

For business policies, the Insurance Act 2015 imposes a duty of “fair presentation of the risk” (section 3). Crucially, the insurer can no longer simply avoid the whole policy for an innocent or careless breach. It must apply a proportionate remedy: if it would have charged more premium, the claim is scaled down proportionately; if it would have imposed different terms, those terms are treated as applying. Full avoidance is reserved for deliberate or reckless breaches.

Breach of a policy condition or warranty

Policies contain conditions (e.g. fit an approved alarm, maintain the property) and warranties. The Insurance Act 2015 abolished the old rule that any breach of warranty automatically discharged the insurer from all liability. Now (sections 10 and 11), a breached warranty merely suspends cover until it is remedied, and an insurer cannot rely on a breach of a term designed to reduce a particular type of risk to refuse a claim for an unrelated loss. So a lapsed alarm certificate cannot defeat a flood claim.

Exclusions and uninsured events

Every policy lists exclusions — wear and tear, gradual deterioration, deliberate acts, certain perils. A decline here turns on policy interpretation: does the loss genuinely fall within the excluded category, and is the exclusion clear and prominent? Ambiguous wording is generally construed against the insurer (the contra proferentem principle).

Late notification

Most policies require you to notify a claim “as soon as reasonably possible”. Late notice can prejudice an insurer, but a decline solely for lateness is only fair if the delay actually caused the insurer real prejudice — the Ombudsman scrutinises this closely.

Underinsurance and “average”

If you insured a property for less than its true rebuild or replacement value, the “average” clause lets the insurer reduce a partial-loss payout in the same proportion. Insure a building worth £500,000 for only £250,000 and a £40,000 claim may be cut to £20,000.

Fraud

A fraudulent claim — exaggeration, fabricated invoices, staged loss — entitles the insurer to refuse the entire claim and, under the Insurance Act 2015, to treat the contract as terminated from the date of the fraudulent act. This is the one area where the proportionate-remedy protections do not apply. The insurer must, however, actually prove fraud to the civil standard; mere suspicion or an unexplained discrepancy is not enough, and an honest but mistaken over-estimate of a loss is not fraud.

What duties your insurer owes you

A rejection does not happen in a vacuum: the insurer is bound by both regulatory rules and common-law duties, and breaching them is itself a ground of complaint.

FCA rules: ICOBS 8.1 and the Consumer Duty

The FCA’s Insurance Conduct of Business Sourcebook (ICOBS 8.1) requires an insurer to handle claims promptly and fairly, give reasonable guidance, settle promptly once terms are agreed, and not unreasonably reject a claim. The rules expressly state that rejecting a consumer’s claim for non-disclosure of something they could not reasonably have been expected to disclose, or for a non-qualifying misrepresentation, is unreasonable. The FCA’s Consumer Duty (in force since 2023) layers on an over-arching obligation to deliver good outcomes and avoid foreseeable harm.

The duty of good faith

Insurance contracts are contracts of “utmost good faith” running in both directions. While the Insurance Act 2015 removed avoidance as the automatic remedy for breach, the duty of good faith survives as an interpretive principle — the insurer must act honestly and reasonably in assessing and paying claims, not look for technical reasons to escape liability.

How to read a decline letter

The decline letter is your roadmap. Read it forensically and identify four things:

• The exact ground. Does it cite a specific policy clause (with number), a warranty, an exclusion, or a statute? Vague reasons (“the claim does not meet policy terms”) are challengeable — demand specifics.
• The clause relied on. Cross-reference it against your policy schedule and wording. Insurers sometimes quote standard wording that was not actually in your version.
• Whether it is a “final response”. A final response must say so and must tell you about your right to the Financial Ombudsman within 6 months. If it does not say “final response”, the 8-week clock may still be running.
• The factual assumptions. List every factual claim the insurer makes (“you failed to disclose X”, “the damage is gradual”). Each is a point you can rebut with evidence.

Step-by-step: what to do next

Work through these stages in order. Documentation discipline at each step is what wins disputes.

1. Request the reasons and the file in writing

Ask the insurer to confirm, in writing, the precise basis for the decision, the exact clause relied on, and the evidence it relied on. You can also make a Data Subject Access Request (free, 30 days under UK GDPR) for the full claims file, including loss-adjuster reports and internal notes.

2. Re-read your policy wording

Compare the cited clause against your policy schedule, IPID, and full wording. Check definitions, the “duty of disclosure” questions you were actually asked, and any conditions precedent. Misreading by the insurer is common.

3. Gather and organise evidence

Assemble photographs, receipts, valuations, surveyor or engineer reports, correspondence, and a clear timeline. If non-disclosure is alleged, retrieve the original application or call recording to show what you were asked and what you answered.

4. Make a formal written complaint

Put your challenge to the insurer as a formal complaint, not just a phone call. State the ground you dispute, the law (CIDRA, Insurance Act 2015, ICOBS), and the outcome you want. This triggers the regulated complaints process and the 8-week clock.

The internal complaints process and the 8-week rule

Before the Ombudsman can look at your case, you must give the insurer a chance to resolve it. Under FCA DISP rules, the firm must:

• Acknowledge your complaint promptly and investigate it;
• Send a final response — or a letter explaining why it cannot yet — within 8 weeks (15 business days for most payment-services complaints);
• Tell you, in that final response, about your right to refer the matter to the Financial Ombudsman Service within 6 months.

If the insurer upholds the decline, or fails to respond within 8 weeks, you are then free to escalate. Keep the final response letter — the 6-month clock to the Ombudsman runs from its date.

Escalating to the Financial Ombudsman Service

The Financial Ombudsman Service (FOS) is a free, independent dispute-resolution body. It is not a court — it decides what is “fair and reasonable in all the circumstances”, taking law, regulator’s rules and good practice into account, which often means it sides with policyholders where an insurer has been technically right but unfair.

Who can use it

Individual consumers, micro-enterprises, and small businesses (broadly, an annual turnover under £6.5m and either fewer than 50 employees or a balance sheet under £5m), plus some charities and trusts. Larger businesses must use the courts.

Time limits

You must refer the complaint to the FOS:

• within 6 months of the insurer’s final response; and
• within 6 years of the event complained of, or — if later — within 3 years of when you knew (or ought reasonably to have known) you had cause to complain.

The FOS may waive these limits in genuinely exceptional circumstances (serious illness, bereavement).

What it can award (2026 figures)

The FOS can also recommend (but not force) higher sums, and can order the insurer to pay the claim, add interest, and pay compensation for distress and inconvenience. An FOS decision is binding on the insurer if you accept it; you keep the right to go to court if you reject it.

How the FOS compares to court

Damages for late payment of claims (Enterprise Act 2016)

Historically, an insurer who dragged its feet on a valid claim faced no penalty beyond interest — the rule in Sprung v Royal Insurance (1997). The Enterprise Act 2016 changed that. It inserted a new section 13A into the Insurance Act 2015 (in force from 4 May 2017), implying into every UK insurance contract a term that the insurer must pay sums due on a valid claim within a reasonable time.

If the insurer breaches that term, you can claim damages for additional losses caused by the delay — lost business, the cost of emergency finance, consequential property damage — over and above the claim and interest. What is “reasonable” depends on the circumstances; an insurer with genuine grounds to investigate is not in breach merely for taking time, but the manner of its conduct counts. A separate one-year limitation period applies to these damages claims, running from the date the insurer pays all sums due on the claim.

When litigation is the route

Most rejected-claim disputes are resolved through complaint and the Ombudsman without ever reaching court. Litigation becomes the appropriate route when:

• the claim value exceeds the FOS award limit and the insurer will not pay the balance;
• you are a larger business outside FOS eligibility;
• you reject an FOS decision and wish to pursue full legal rights; or
• you bring an Enterprise Act 2016 damages claim, which the courts (not the FOS) are best placed to quantify.

Court litigation and advocacy are reserved legal activities. Hayhills does not conduct them. Where litigation is the right step, we advise you on merits and strategy and introduce a regulated solicitor to run the case, staying alongside you to keep it focused and cost-effective.

Common mistakes to avoid

• Accepting “no” at face value. The first decline is an opening position, not the final word. Most overturned claims were challenged, not abandoned.
• Complaining only by phone. Always put your complaint in writing so the 8-week clock and a paper trail begin.
• Missing the 6-month FOS deadline. The clock starts on the final response letter — diarise it the day it arrives.
• Arguing emotion, not evidence. The FOS and courts respond to documents, timelines and the policy wording, not frustration.
• Overlooking the proportionate-remedy rules. Insurers sometimes still threaten full avoidance for innocent errors — the Insurance Act 2015 usually forbids it.
• Forgetting late-payment damages. If delay caused real loss, the Enterprise Act 2016 may give you a separate claim.
• Going to court too soon. The free FOS route should usually be exhausted first unless value or eligibility rules it out.

Related questions people also ask

Does rejecting a claim affect my future premiums?

A declined claim is still recorded on the industry claims and underwriting database (CUE) and you must usually still disclose it when buying future cover, which can raise premiums. If you overturn the rejection and the claim is paid, it is treated as a paid claim. If the rejection itself was unfair, that is a strong argument that any future premium loading based on it should be reconsidered — a point worth raising with the new insurer or broker.

Can my broker help if my claim is rejected?

Yes. A regulated broker owes you a duty to act in your best interests and can press the insurer, explain the wording and sometimes resolve the dispute informally. But beware: if the rejection arises from something the broker got wrong — a mistaken answer on the proposal, a failure to pass on information, or arranging the wrong cover — your claim may lie against the broker for professional negligence rather than (or as well as) the insurer.

What if the insurer pays only part of my claim?

A partial payment (“we’ll pay 60%”) is itself a decision you can complain about. Common causes are the average clause, a disputed valuation, or a deduction for betterment. Ask for a clause-by-clause breakdown of how the figure was reached, then challenge each deduction. Accepting an interim payment “on account” does not waive your right to pursue the balance, but get that confirmed in writing before banking it.

Is there a deadline to make the original claim?

Separate from the complaint deadlines, the underlying right to sue an insurer on the policy is subject to the Limitation Act 1980 — generally six years from the date the cause of action arises (often the date of loss or of the insurer’s refusal). Do not let a long complaint or Ombudsman process quietly run down this court limitation period; if litigation is a realistic backstop, the clock needs watching.

Can a third party challenge a rejection?

Under the Third Parties (Rights against Insurers) Act 2010, if an insured party becomes insolvent, the injured third party can sometimes claim directly against the insurer — and challenge a rejection — standing in the insured’s shoes. This matters in liability claims where the policyholder company has gone under.

Frequently asked questions

This article is for general information only and does not constitute legal or accountancy advice. Hayhills Limited, trading as Hayhills Legal Advisory, provides non-reserved legal advisory services. Always check current requirements at GOV.UK.