There is a news story about a 15-year-old Citroën that was towed by the council and the owner was not informed. The owner assumed it was stolen, claimed against the insurance and was paid out. Unsurprisingly when the error was identified one year later the insurance company requested the £2,190 paid for the ‘theft’ back. What is more of a surprise is that they also requested £90 more as "the cost of setting up her policy". At no point is there an suggestion of any dishonesty from the car owner. While it is not explicit it is implied this paragraph explains that charge:
“An engineer’s report has concluded that it’s only worth scrap, which, if they’d known, would have invalidated my policy,” she said. “It had only recently passed its MOT when it vanished, but Hastings has so far failed to send me the report and is threatening to send debt collectors.”
What are the circumstances where an insurance company can reclaim the cost of setting up a policy? It is worth noting that in the UK second hand car prices are low and repair costs and scrap prices are high, such that the difference between a good functioning 15 year old car and scrap value can be a very small repair.