Peter Bebb · DRN-6197656

The complaint C, a limited company, complains that Peter Bebb, a broker, has provided it with a poor recommendation when arranging a buildings insurance policy for a company property. Any reference to C or Peter Bebb includes respective agents and representatives. What happened The background of this complaint is well known between the parties involved so I’ve just provided a summary of events here. • In May 2017 C took out a buildings insurance policy for a holiday let property. C took out the cover through a broker (Peter Bebb) within an advised sale. The buildings sum insured at the time was set at £120,000. • Peter Bebb said in November 2017 C contacted it to increase the buildings sum to £165,000. And in the years that followed the policy continued to renew, and the buildings value increased year on year as it was indexed linked. • C had a valuation report produced in January 2023 for the purposes of its re- mortgage. This indicated the rebuild cost would be around £300,000. • By May 2024 the buildings sum insured was £201,255. The insurer at this time was Company A. • In December 2024 C made a claim on their buildings policy following an escape of water. Company A accepted it, but said C was underinsured. It concluded the insured sum for the buildings of £201,256 was insufficient and instead a sum of £388,000 was the appropriate value. • So, Company A applied an average calculation to the settlement which reduced it from around £6,369.69 to just under £3,303.96 (minus excess of £500). • C complained about Peter Bebb’s role in the matter and brought its complaint to this Service. Our Investigator requested various documents from Peter Bebb, including evidence of any guidance provided to C regarding the rebuild costs at a renewal, as well as evidence of a clear question regarding the sum insured alongside policy documentation and renewal materials. • Peter Bebb said an advised sale didn’t mean it was responsible for calculating the rebuild figure or setting the total sum insured. And it said C’s alteration to the sum insured in 2017 showed C was aware of their obligation to set this accurately. Peter Bebb also said its demands and needs and statement of facts documents supported this and highlighted the impact of being underinsured. • Peter Bebb provided a copy of the renewal letter and said it always advised it was not a surveyor so it was the policyholder’s responsibility to ensure the buildings sum insured was adequate and that the market value was not necessarily the rebuild value. And it said it did not offer any guidance on how to calculate the sum insured. • Our Investigator upheld the complaint saying:

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o Peter Bebb’s advised sale meant it was required to ensure the policy was suitable for C’s needs. And Peter Bebb had provided little to support it gave C information as to how to select an appropriate buildings sum insured. Nor had it demonstrated it had drawn the significance of underinsurance to C. o Peter Bebb had told C that the rebuild cost wouldn’t be higher than the market value – which was not correct. o Had Peter Bebb provided clear guidance to show the rebuild estimate could be different to the market valuation, C would’ve most likely amended the level of cover taken to reflect the sum given in the January 2023 valuation. o C would’ve still been underinsured, but this would’ve limited the level of reduction taken by Company A. So, she suggested Peter Bebb pay £1,621.06, plus 8% simple interest which she said was reflective of the shortfall in the claim. And she said Peter Bebb should pay £100 to reflect the inconvenience caused to C. • Peter Bebb disagreed, saying it wasn’t aware of the January 2023 valuation, and this highlighted that C was aware the sum insured was inadequate. It said C could’ve contacted Peter Bebb and it would’ve discussed increasing the cover. • C also replied, saying its January 2023 valuation report was based on a remortgage and not for insurance purposes. And it said it had always relied upon advice from Peter Bebb that the rebuild value is always lower than the market value. • The Investigator didn’t change her mind, saying Peter Bebb still hadn’t provided any evidence to show what C was asked at renewal regarding the renewal costs, nor any of the key documents she’s requested to show what the sum insured was. So, Peter Bebb hadn’t demonstrated it had asked clear questions or provided appropriate guidance when selecting the correct rebuild value. • Peter Bebb didn’t reply any further. C questioned whether Peter Bebb should pay the full difference in the settlement reduction in light of its mistakes. So, the matter has been passed to me for an Ombudsman’s final decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so I’m upholding this complaint, I’ll explain why. In this case there’s no dispute that C was underinsured based on the sum insured for the building being less than its actual rebuild cost. The degree of this may be a matter between C and Company A as the insurer. My focus in this decision is on the actions of Peter Bebb as its role as a broker. Peter Bebb sold this policy on an advised basis. This meant it had to ensure that the policy was suitable for C’s needs. And alongside this it needed to provide C with clear, fair and not misleading information to allow it to make an informed choice. So, I’ve kept these obligations in mind when looking at what’s happened. When selling a policy on an advised sale, I would normally expect to see a demands and needs document or equivalent notes that were reflective of the questions asked from the seller and the answers given by the policyholder. And at renewal I would expect to see equally clear, fair and not misleading information about the policy and any key points drawn

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to the policyholder’s attention. Peter Bebb hasn’t provided me with much in the way of documentation in this case. It has provided a copy of its renewal letter from 24 April 2024. This appears to be a cover letter and says the renewal was prepared on the details provided previously and based on the same terms previously in place. It said to disclose any material changes and included the proposed premium charge below this. There were no attachments or further documentation supplied alongside this letter – such as the insurance schedule, statement of fact etc. So, I’ve got very little to support what was actually shared with C at the point of renewal. This means I have little to show whether such documentation made it clear what level of cover was taken and the consequences of this being insufficient. On the basis Peter Bebb has been given multiple opportunities to submit this type of documentation and we’ve received little, I’m simply not satisfied any of this information was set out clearly to C. In this case the reason for the underinsurance was related to the buildings sum insured. Calculating such a value isn’t something I would imagine most policyholders would be able to accurately calculate without support. And there are different recognised methods to obtain an answer. These include using recognised online build calculators, or reliance on a professional survey. Peter Bebb has specifically said it did not offer any guidance on how to calculate the buildings sum insured. And as a result, it appears C was seemingly left without guidance or advice as to how to calculate this. Peter Bebb has said it wasn’t for it to complete the calculation itself. This in itself doesn’t sound unreasonable, as its expertise is in the selling of insurance not valuing properties. But I would expect Peter Bebb to be able to provide support and information as to how C would go about obtaining this sum given its significance for the contract of insurance it was arranging on C’s behalf. As well as the consequences of this sum not being sufficient. And from what I’ve seen, Peter Bebb hasn’t provided this. C has provided me with email chains between C and Peter Bebb’s staff. Within these Peter Bebb refers to online calculators not being reliable. In another an agent said “The rebuild value will always be less than the market value as the land isn’t included in rebuild only materials and labour.“ This second comment simply isn’t accurate. This latter comment was made in November 2024 – sometime after the renewal so I acknowledge this may not have been specific advice C was given prior to the loss but I consider it relevant as an indication of Peter Bebb’s approach to buildings sum insured. Overall, on the available evidence presented, I’m satisfied Peter Bebb failed to ensure the policy was suitable and it failed to give C the information it needed about the buildings sum insured to ensure it was accurately insured. So, I need to think about what would’ve most likely happened if things had proceeded as they should’ve done. That is to say, what would’ve most likely happened if Peter Bebb had clearly outlined to C the recognised ways of calculating the buildings sum insured (such as using the recognised online calculators or relying on a surveyor’s report) and the consequences of being underinsured. And I’m focusing on the May 2024 renewal here as this was the most recent renewal prior to the claim being made. I think on balance, had Peter Bebb told C of the recognised methods of calculating a rebuild value (such as reliance on a recent surveyor’s report) this most likely would’ve led to C reviewing again its valuation report from January 2023. This is a detailed report and it

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estimates the market value of the property to be around £225,000 – £250,000, and the rebuild cost to be £300,000. As a result, I think its most likely C would’ve put forward this figure of £300,000 to Peter Bebb and this would’ve been the level of buildings cover C would’ve taken. And, as a result, Company A would have based the claim settlement on a £300,000 rebuild cost. Our Investigator put forward a sum of £1,621.06 (and her calculations) that represented the settlement C would’ve received had the buildings sum insured been set to £300,000 instead of £201,255. I won’t repeat the calculation here as neither party has disputed it so I’m satisfied this is a fair sum to reflect the impact of Peter Bebb’s actions on C’s claim. Peter Bebb has said the fact C had obtained this report in January 2023 and failed to disclose it or raise it at renewal should shift the responsibility to C. While I understand its concerns here, Peter Bebb has provided me with so little in the way of documentation I’m not satisfied that C was informed enough to know its particular insured sum nor the significance of this if it was inaccurate. So, this hasn’t changed my thinking. Peter Bebb has also said the level of cover alteration in 2017 highlighted that C understood its obligations. Again, Peter Bebb has provided little to evidence what happened in 2017 or the conversations around this. So, this hasn’t changed my mind either. C has indicated that Peter Bebb’s mistake should mean its liable for the full underinsurance reduction. I can understand C’s frustration. But my role requires me to consider what most likely would’ve happened, and if Peter Bebb had indicated C was safe to rely on a recent valuation I would’ve been satisfied that was reasonable. So, I wouldn’t think it fair to hold Peter Bebb responsible if that valuation produced by a separate party was inaccurate. C has been clear it has no complaint with Company A. But if C determines they are unhappy with Company A’s actions regarding the level of reduction or valuation it placed on their property against the sum within C’s valuation, it should raise this with Company A in the first instance. Likewise, if C determines the valuation produced by their surveyor in 2023 was inaccurate, a complaint would need to be addressed with the surveyor directly. Our Investigator awarded £100 to reflect inconvenience to C’s company. I’m satisfied this is a sum reflective of the impact on the company itself. My final decision For all the above reasons, I’m directing Peter Bebb to pay C: • £1,621.06 to reflect the reduced settlement through C’s insurance claim. • 8% simple interest from the date the original payment was made by Company A to C until the date of settlement. If Peter Bebb is unable to establish this date, it should calculate this from 1 January 2025. • £100 to reflect the inconvenience caused. Under the rules of the Financial Ombudsman Service, I’m required to ask C to accept or reject my decision before 7 April 2026. Jack Baldry Ombudsman

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