DRN-6287014

The complaint Mrs M complains about how Marshmallow Insurance Limited handled a third party’s claim against her motor insurance policy. Any reference to Marshmallow includes its agents. What happened Mrs M has a motor insurance policy underwritten by Marshmallow which renews in October each year. In September 2025, a solicitor acting for a third party made a claim against Mrs M’s policy. The claim was that in July 2025, Mrs M’s car collided with a pedestrian, causing him personal injury. Mrs M denied that she had been involved in an accident in July 2025 or was in the area where the alleged incident was said to have happened. She provided Marshmallow with the information it required from her. Mrs M told Marshmallow she thought this claim was connected with a previous incident in March 2025, in which another third party had made a false claim against her. She said the photograph supplied in support of the recent claim was from the earlier incident in March 2025. Marshmallow referred the claim to its counter-fraud team, which directed the gathering of further evidence. In November 2025, the third party in relation to the alleged July 2025 incident contacted Marshmallow, denied any involvement in the incident and said he had been the victim of identity theft. Marshmallow rejected the claim and said it did not accept that a genuine accident had occurred. Marshmallow says the claim will be removed from all industry databases once the third party’s solicitor has formally withdrawn the allegation or after six months from the date Marshmallow declined the claim, whichever is earlier. It said Mrs M’s premium would then be corrected. Mrs M says that Marshmallow did not deal with the claim efficiently and effectively, which meant that her premium increased on renewal in October 2025 and she could not get quotes from other insurers because of the open claim. She says the claim has caused her significant emotional distress and had an impact on her wellbeing. Mrs M wants Marshmallow to hold the individuals involved to account. Marshmallow agreed it had not handled the claim made in September 2025 well. It said it did not cross reference an image provided by the claimant with an image from the earlier claim against Mrs M, delayed dealing with the matter, asked Mrs M for the same information repeatedly and should have reviewed the information it already held before asking Mrs M to provide information again. It offered Mrs M compensation of £300 in relation to its handling of the claim, which increased to £400 after Mrs M referred her complaint to this service. Mrs M did not think that Marshmallow’s offer of compensation was sufficient. She said this matter had also had a negative impact on her daughter at an important time in her education. Mrs M thinks this was a coordinated deception and wants the individuals concerned held to account; she wants Marshmallow to pursue the third party in court and to clear her name.

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One of our Investigators looked at what had happened. He said Marshmallow rejected the claim made in September 2025 and followed its own process in giving the third party’s solicitors time to respond before closing the claim. The Investigator said the terms of Mrs M’s policy provide that Marshmallow has discretion in the conduct of any proceedings or in the settlement of any claim, so it could decide how to handle the matter. He said Marshmallow had not treated Mrs M unfairly in deciding not the pursue the third party in this case. The Investigator said once the claim is closed, Mrs M can request a recalculation of her premium. Mrs M did not agree with the Investigator. She still thought that Marshmallow’s offer of compensation of £400 was unfair and unreasonable. Mrs M said she needed to change her car’s number plate to protect herself from being wrongly accused again, which costs approximately £400, so there would be nothing remaining of the compensation. Mrs M provided evidence about the impact this matter has had on her health. She also complained that her no claims discount overview showed the open claim relating the to the alleged incident in July 2025 and a fault claim in March 2025. The Investigator considered what Mrs M said but did not change his view. Mrs M asked that an Ombudsman consider her complaint, so it was passed to me to decide. 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. I am sorry that Mrs M has found this matter so stressful. It is clear she has very strong feelings about what has happened and has provided detailed submissions to support the complaint, which I have read and considered. I trust that Mrs M will not take as a discourtesy the fact that I focus on what I consider to be the central issues. It is common ground that Marshmallow made errors in its handling of the claim by the third party. The remaining issue for me to decide is whether it should do more to put matters right. In this decision, I am dealing only with Mrs M’s complaint which led to Marshmallow’s final response of 4 November 2025. Mrs M has recently complained about how Marshmallow has recorded the outcome of a claim relating to an incident in March 2025. I do not deal with that matter in this decision, as Marshmallow has not had an opportunity to respond to it. I understand that one of my colleagues has explained to Mrs M that she can complain to Marshmallow about that and, if she is not satisfied with its response, she may refer the matter to this service. I’ve taken into account the law, regulations and good practice. Above all, I’ve considered what’s fair and reasonable. The relevant rules and industry guidance say Marshmallow has a responsibility to handle claims promptly and fairly and must act to deliver good outcomes for retail consumers. Marshmallow’s handling of the claim It is common ground that Marshmallow made errors in its handling of the third party’s claim made in September 2025 which related to an alleged incident in July 2025. In its final response to Mrs M’s complaint, Marshmallow says it did not cross reference the image provided by the third party in relation to the disputed claim with the image provided in the earlier claim, which led to a delay in rejecting the claim. Marshmallow said Mrs M had to repeat information she had already provided. I do not think Marshmallow was at fault in making its initial enquires about the third party’s claim, gathering evidence and instructing agents to take a statement from Mrs M. That all

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took some time. As the claim was made in September 2025, even if Marshmallow had not made the errors I have referred to above, it is unlikely it would have closed the claim by the time Mrs M’s policy was due for renewal in October 2025. I therefore do not think Marshmallow’s handling of the claim affected the premium Mrs M paid at renewal. Marshmallow says the claim will be removed from all industry databases once the third party’s solicitor has formally withdrawn the allegation or after six months from the date it rejected the claim, whichever is earlier. It says Mrs M’s premium will be adjusted to reflect that the claim was rejected. Marshmallow is following its usual process when it declines a claim and it is treating Mrs M the same as it would treat other policyholders in her position. I think that is fair and reasonable. I do not think Marshmallow acted unfairly or unreasonably in not pursuing the third party in relation to the claim it rejected. As the Investigator said, the terms of Mrs M’s policy provide that Marshmallow has discretion in the conduct of any proceedings or in the settlement of any claim. I do not think it treated Mrs M unfairly in this case in deciding to reject the claim and in not taking further action in this case. Mrs M’s distress and inconvenience Marshmallow’s repeated requests and failure to link the photograph provided in support of the September 2025 claim to the March 2025 incident all caused Mrs M distress and inconvenience. I have considered what Mrs M has said about this and the evidence she has provided from her doctor. Mrs M’s doctor refers to stress caused by the claim and the dispute with her insurer. Marshmallow is responsible for how it dealt with the claim but is not responsible for the fact that a third party made a claim it later found to be without merit. Nor is it responsible for Mrs M’s daughter’s distress as she is not the policyholder. When we consider compensation for distress and inconvenience we look at the effect of the errors made by the business on the individual concerned. In many cases, including this one, there has been distress and inconvenience caused by other factors which are not the responsibility of the insurer. I have noted what Mrs M has said about the cost of replacing her number plate. I don’t think that is a cost Marshmallow is responsible for, so I have not taken it into account when considering compensation for distress and inconvenience. Based on what I have seen, I consider Marshmallow’s offer of compensation of £400 to be fair and reasonable. In reaching that view, I have taken into account the nature, extent and duration of Mrs M’s distress and inconvenience caused by Marshmallow’s errors in this case. Putting things right In order to put things right, Marshmallow should pay Mrs M the compensation of £400 in relation to her distress and inconvenience which it has now offered to pay. My final decision My final decision is that I uphold this complaint to the extent indicated above. Marshmallow Insurance Limited should now take the step I have set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs M to accept or reject my decision before 11 May 2026. Louise Povey Ombudsman

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