Zurich Assurance Limited has been ordered to pay a claimant £4,000 in compensation after unfairly placing her under the surveillance of a private investigator.
The Financial Ombudsman Service (Fos) found the insurer had wrongly instructed a private detective to film the claimant when it became concerned about the legitimacy of a claim on her group income protection policy.
The claimant first claimed on the policy for severe back pain in November 2015, but after a year Zurich instructed a private detective to gather further evidence following what it deemed to be inconsistencies in the case.
Zurich claimed the footage obtained during the surveillance suggested the claimant was able to perform movements which had previously been declared "significantly impaired" and so alerted the claimant’s employer and the monthly benefit payments were stopped.
The ombudsman found whilst Zurich was entitled to instruct a private detective in such circumstances, its decision to do so was premature and should have been a last resort due to the intrusive nature of the surveillance.
The ombudsman said: "It [Zurich] must go about this fairly and the decision to do so, must be carefully considered against all other viable and appropriate options. And I’m not persuaded that Zurich did this."
Rather the ombudsman suggested first seeking a second medical opinion on the claimant’s condition or further communication with her specialist would have been more appropriate, and in this case would have led to the claimant's actions in question being medically justified.
The ombudsman said: "Overall, I think Zurich could have handled things much better than it did. I think the decisions it made, at times, were not always the right ones and this caused the claimant significant levels of trouble and upset."
Although the payments were eventually reinstated and backdated prior to Fos’s involvement, the ombudsman found the decision to cease the instalments had also been made too quickly.
In its guidelines on the instruction of private investigators published in 2014, the Association of British Insurers (ABI) said surveillance should only be undertaken where there is "reasonable suspicion that the claim is not genuine".
The ABI advised an insurer should always consider what information it already has at its disposal, or may gain access to, before instructing a private investigator.
Roy McLoughlin, associate director at Cavendish Ware, said he empathises with insurers in circumstances of a truly fraudulent claim as such cases increase premiums for other customers.
He said: "There is a balance to be struck. Whilst we should avoid a 'Big Brother' situation, in cases of insurance fraud an insurer is duty bound to clarify the facts of the claim within reasonable grounds.
"On this occasion it is about finding the right balance, but as a principle an insurer should use all reasonable means to validate ongoing and initial claims."