Here at QANW, we can talk all day about how good our Insurance Backed Guarantees (IBGs) are and how things work, but the big question everyone always asks is; ‘Are IBGs worth the paper they’re printed on?’. The simple answer is YES and we’d like to take this opportunity to give a few reasons why an IBG is important!
Why choose an IBG?
Recently, there’s been talk of discretionary funds and how these are changing things in terms of the need for consumer protection through the form of insurance and in particular, IBGs. A discretionary fund might be established by an association or by companies other than regulated insurance providers.
IBGs and discretionary funds are not the same (even though they might at first glance appear to cover the same risks) and do not provide the same level of protection; so we thought it would be important to highlight these differences:
· IBG policy holders who have a complaint in respect of a claim have the option to refer the complaint to the Financial Ombudsman Service (FOS) at no cost to the policy holder. The FOS is an independent, statutory body who can decide complaints in respect of insurance products. IBG insurer is bound by the outcome of those FOS decisions; meaning that if FOS decides that the insurer must pay a claim; the insurer must pay that claim and cannot appeal. Access to FOS is not something that is provided by discretionary fund operators; meaning that if a customer remains unsatisfied with a claims outcome; ultimately their recourse is to the Courts or to whichever ADR schemes the fund operator agrees to offer.
· IBG policy holders have the benefit of the Financial Services Compensation Scheme (FSCS). This means that if the insurer that underwrites the IBG was to fail, the policy holder is protected by FSCS. Discretionary funds are not financial services products and therefore do not qualify for FSCS protection. Meaning that if the fund operator were to fail, customers would only become creditors and would likely not receive recourse in the event of a claim.
· IBG insurers must be authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) in the UK and therefore must have the appropriate assets, systems and controls in place in order to meet claims, manage operational risk, and produce good outcomes for customers. These rules -rightly strict- are enshrined both in law and in the binding regulatory sourcebooks. Unregulated firms providing other forms of protection are not held to these standards by regulators.
· Perhaps most importantly, the key difference, by law, is that insurance creates an enforceable legal obligation to respond. Where there is a transfer of risk; and where there is such an enforceable obligation – there is a contract of insurance by definition. Where there is a means of protection other than a contract of insurance, there is no obligation to respond. Therefore, if an alternative form of protection seems too good to be true; it may well be!
In summary, IBGs are certainly worth the paper they’re printed on, as they provide robust and regulated protection. Rather, the real question should be whether or not alternative forms of protection are worth the paper they’re printed on…
Is Deposit Protection worth it?
Another issue that we’ve seen be discussed within the glazing industry is the lack of confidence in Deposit Protection, so we thought this was also a question worth asking – what is Deposit Protection and is it worth it? Deposit Protection Insurance is a valuable option for contractors to offer to homeowners who are looking for additional peace of mind by protecting a deposit payment made for the home improvement work they have employed a contractor to carry out.
QANW Deposit Protection will protect a deposit paid by the homeowner up to 25% of the contract value, up until the work detailed in the contract commences. In simple terms, it means the homeowner’s money is safe in the event that a contractor ceases to trade before the work commences. Most policies are valid for up to 90 days, or until the home improvement work commences. This type of protection is designed for financial protection. Another reason would be the ability to give customers peace of mind, as they will have the confidence that their deposit payments are protected. All in all, we’d say that Deposit Protection, if available, is 100% worth it for both customers and contractors.
Are IBG claims paid out?
Being regulated by the Financial Conduct Authority (FCA) means that QANW must design products to meet specific customer needs and these products should perform as expected. This means that if a claim falls within the policy terms, then QANW will settle that claim. As with all insurances there are exclusions on cover, but we are happy to confirm that in Q2 of 2023, QANW paid out on 73.1% of claims made on its policies.
All in all, we’d say IBGs are a pretty big deal so don’t hesitate to contact QANW for more information – whether you are already a member, or if you’re looking to join!
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