Two motor policies were voided. The statute says one of those premiums should have gone back.

On 28th July the Financial Ombudsman Service published two final decisions about motor insurance policies that had been avoided. Avoided, not cancelled. The distinction matters: a cancelled policy existed and then stopped. An avoided policy is treated as though it never existed at all, and you have to declare it to every insurer you approach afterwards.

In the first, DRN-6308923, Aviva Insurance Limited kept a premium of £1,079.33 and the complaint was not upheld. In the second, DRN-6285142, Marshmallow Insurance Limited also kept the premium, and that complaint is recorded as upheld.

Both consumers lost the thing they came for. What separates the two files is a single classification, and that classification, not the conduct and not the sympathy, decides what the insurer is allowed to keep.

The machinery

Avoidance for misrepresentation runs on the Consumer Insurance (Disclosure and Representations) Act 2012. The structure is tighter than most people assume, and it is tighter against the insurer than most people assume.

Section 2(2) puts a duty on the consumer to take reasonable care not to make a misrepresentation. Section 4 then says the insurer has a remedy only where the misrepresentation is a qualifying one, which requires the insurer to show that without it, it would not have entered the contract at all or would have done so only on different terms. That is an evidential burden, and it sits on the insurer.

Section 5 sorts qualifying misrepresentations into two boxes. Deliberate or reckless under section 5(2), meaning the consumer knew the answer was untrue or did not care, and knew it mattered to the insurer or did not care. Careless under section 5(3), which is everything else. Section 5(4) is the line most people never get told: "It is for the insurer to show that a qualifying misrepresentation was deliberate or reckless." The default is careless, and the insurer has to argue its way out of it.

The boxes lead to different money. Schedule 1, Part 1, paragraph 2 says that for a deliberate or reckless misrepresentation the insurer may avoid the contract, refuse all claims, and "need not return any of the premiums paid, except to the extent (if any) that it would be unfair to the consumer to retain them". Paragraph 5 covers careless misrepresentation where the insurer would not have written the policy on any terms: the insurer may avoid and refuse all claims, "but must return the premiums paid".

The remedy on the cover is the same, with the opposite answer on the money.

Aviva, by the book

Mr A bought an Aviva policy through a price comparison site in November 2025 and paid £1,079.33 from his own bank account. Cover was conditional on proof of five years no claims discount. A proof document was uploaded to Aviva's portal on 13th November, and the firm that supposedly issued it confirmed it had been falsified.

Mr A said he had been ghost broked, cold called by someone posing as an insurance representative, and that he never uploaded anything. The ombudsman did not accept it, and the reasoning is worth reading if you ever have to run a case on the balance of probabilities. Mr A gave inconsistent accounts of when the caller obtained his details. He could not name the caller or the firm. And the point that did the most damage: an elaborate fraud in which the fraudster pays the insurer the full genuine premium from the victim's own account produces no benefit to anyone.

Deliberate or reckless, therefore paragraph 2, therefore Aviva keeps the money. The statute and the outcome line up exactly.

Marshmallow, off the book

Mr M answered two questions when he applied. Who will the car be registered to, and who will own the car. Marshmallow gave written clarification on both, including that the registered keeper is the person on the V5C and that the owner is the person who paid. Mr M said it was him. It was his brother-in-law, who had insured the same car separately.

Marshmallow produced confidential underwriting evidence that it would not have offered cover at all on the true facts, which satisfied section 4. It then classified the misrepresentation as careless, and the ombudsman agreed.

Careless plus would not have written it at all is paragraph 5. Paragraph 5 says the insurer must return the premiums paid.

Marshmallow kept them, and the ombudsman allowed it. The reasoning was that the car had been in an accident, Marshmallow was compelled under the Road Traffic Act 1988 to act as statutory insurer and settle the third party's claim, and where an insurer has had to pay out it is fair for it to retain the premium to offset that loss. Mr M received £100 for the distress of having a settlement offer withdrawn, which is why the file reads as upheld.

That is a real and defensible piece of reasoning, but it is also the ombudsman's fair and reasonable jurisdiction being used to reach a different answer from the one the statute gives by default. If you are the consumer in that case, the £100 is not the story. The story is that paragraph 5 pointed one way and the outcome went the other, and nothing in the decision suggests Mr M ever argued paragraph 5 at all.

What to do with this

If an insurer has avoided your policy, three things are worth more than protesting your honesty.

Ask which box they have put you in, in writing. Careless, or deliberate or reckless. They have to pick one, and under section 5(4) they carry the burden on the second.

Ask them to evidence the section 4 test, not assert it. Underwriting criteria showing they would have declined or priced differently on the true answer. In the Marshmallow decision that evidence existed and was decisive. Where it does not exist, there is no qualifying misrepresentation and no remedy at all.

If the answer is careless, ask for the premium back and cite Schedule 1, Part 1, paragraph 5. You may still lose it, as Mr M did, but you will lose it to a reasoned argument about fairness rather than to nobody having raised the point.

One more reason to care about that last sentence this week. At Report stage on 8th September, peers debated an amendment on the matters the Financial Ombudsman must take into account when deciding whether an outcome is fair and reasonable. Third reading is on 15th September. DRN-6285142 is what that discretion looks like in one case, on one premium, for one person who did not know the default was his.

Also worth your time this week

A week defined by one four-hour outage and a run of regulators being told they are not doing enough.

• The air traffic control failure is a redress event, not just a travel story. NATS went down for four hours on Tuesday 8th September, cancelling more than 2,000 flights. The Transport Secretary told the Commons she did not believe it was unavoidable, ordered an independent CAA review, and said consumer redress needs thinking about. Note what the BBC found on 10th September: passengers who took a refund rather than a four-day-delayed rebooking were left roughly £1,300 down on accommodation and excursions nobody will cover. UK261 pays for the flight. It does not pay for the holiday. BBC.
• Three UK product recalls all landed on 10th September. The Love to Dream Sleep Machine (model LTD-SM23) and the Volta VT40IT treadmill are both fire risks; Waitrose Essential Pitted Black Olives in 120g packs with use-by dates of 13th, 18th and 27th September are a Listeria recall. Stop using, return, refund. Which?.
• MPs told three regulators they are failing vulnerable customers. The Public Accounts Committee reported on Ofcom, Ofgem and Ofwat on 10th September, pressed the government for a timeline on an independent Water Ombudsman with legally binding powers, and picked up that customers often are not signposted to the ombudsman at all. ISPreview, MSE.
• Ofcom launched a consumer hub the following day. Money-saving tools, switching guidance and complaint routes at ofcom.org.uk/onyourside. Timing is doing some work here. ISPreview.
• HMRC is reviewing more than 100,000 tax bills. A fault stopped beneficial ordering rules being applied to P800 calculations, affecting 107,000 taxpayers for 2025-26, mostly people with a pension, savings interest or dividends alongside a salary. Check the letter against your own records. The claim deadline is four years from the end of the tax year. Which?.
• The CMA wrote to heating oil suppliers about unfair terms. Specifically clauses limiting liability for non-delivery or late delivery. Off-grid households have no price cap, so the contract is the only protection there is. GOV.UK.
• Home insurance claims are accepted far less often than motor. The FCA's value measures data, updated 11th September, puts home insurance claims acceptance at 62 to 71 per cent against motor at 99 per cent, with home claims complaints running at 7 to 13 per cent. If a home insurer has declined your claim, that dataset is evidence. FCA.
• Netflix raised UK prices again, with the ad-supported Standard tier up 33 per cent from £5.99 to £7.99 for new subscribers from 3rd September, rolling out to existing subscribers with a month's notice. MSE.
• Employment Tribunal delays hit a record. 70,000 open cases, London listings reaching December 2029. The three-month limitation period has not moved. The wait after it has. City AM.
• The Financial Services and Markets Bill reaches third reading on 15th September. At Report stage on 8th September peers debated what the Financial Ombudsman must take into account in deciding whether an outcome is fair and reasonable. Parliament.

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