In uncertain times, it’s more important than ever for businesses to reassure homeowners and offer them complete peace of mind – that’s the real value of an Insurance Backed Guarantee (IBG).

The key thing to remember when looking for consumer protection is to make sure that you are dealing with a UK Authorised Insurer offering a genuine insurance policy. If a scheme just talks about ‘guarantees’ rather than ‘insurance’ they may not be insuring risk with a bona fide policy in favour of consumers. It is always worth checking with the provider if this is the case.

Premiums from Insurance Backed Guarantees go into the pot to pay for claims made by consumers. Insurers have to demonstrate that they have sufficient funds to service claims over the period of the risks they underwrite. Financial services regulation generally prohibits unauthorised firms from underwriting these types of risk, so they are not regulated in the same way as authorised insurers. This means that it isn’t possible to tell how fees and premiums are used and crucially, whether funds will be available to honour guarantees when they’re needed the most – when the customer makes a claim.

These unregulated firms are also not obliged to make decisions on complaints in the same timely manner as insurers. Plus, if a consumer disagrees with a claims or complaint decision by an unauthorised firm, there may be limited options available.

Looking at the potential outcomes for a consumer in a real-life situation, for example, if a provider decides not to pay a valid claim made by a homeowner.

An unregulated guarantee provider may have their own internal complaints process, where the customer may complain against the decision and seek to have it overturned. But there is no prescribed legal framework (governing timescales, etc) for such a process. This means they can take their own time on responses and results in consumers having to take the case to court, which can be a lengthy and costly process. The chance of the consumer getting the result they need will generally depend on how much money and time they have to fight the provider’s decision in a court of law (rather than the validity of their complaint).

Whereas, if the provider is a UK Authorised Insurer, they are bound by regulation and are legally required to provide a final decision on any complaint within prescribed time limits set by the regulator. If the customer disagrees with that decision, they have the right to refer the complaint for independent decision, free of charge, to the Financial Ombudsman Service (FOS). And the UK Authorised Insurer is legally bound by the FOS’s decision.

It all comes down to the value of a small business’ reputation and understanding what financial protection actually offer to past customers when a business owner retires, or starts working with someone else. IBGs give consumers complete confidence that their home improvement investment is properly protected.

The Content for this article has been provided by TAF Partner and Insurance Backed Guarantee Experts, QANW. Find out more about QANW and IBGs online here.

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