Consumers need to take a stand as insurers undervalue car claims
The Financial Conduct Authority (FCA) said that some consumers whose cars were being written off by their insurers after an accident were being given less than the vehicle’s fair market value. Often insurance companies are only increasing the payout after a customer complains.
The financial watchdog said that the current cost-of-living squeeze made these cases even more damaging to consumers and that it was taking action against firms that it believes are violating FCA rules.
Sheldon Mills, executive director, consumers and competition at the FCA, said: “When making an insurance claim, people shouldn’t need to question whether they are being offered the right amount for their written-off car or other goods that they need to replace.
“Insurance firms should offer settlements at the fair market value. This is especially important now as people struggling with the cost of living will be hit in the pocket at precisely the time they can ill afford it.
“We are watching the behaviour of firms closely and will act quickly to stop firms and prevent harm to consumers where we see it.”
While insurers were probably also feeling pressure to control costs, doing so by undervaluing vehicles and making low offers is unfair, the FCA said, and would hurt the most financially vulnerable people the hardest.
Complain to insurance company then the Ombudsman
The regulator said customers who think they should receive a higher offer should first complain to their insurer and then if it’s not resolved, complain to the Financial Ombudsman.
Insurers are allowed to offer cash in lieu of a repair or replacement, but sometimes that’s not going to best suit the client.
The FCA says insurance companies should:
- ensure customers understand the implications of the different settlement options available
- have sufficient claims-handling procedures, and
- not incentivise their staff to engage in practices that could harm the value a client deserves.