FCA warns insurers to stop undervaluing cars when settling claims
The Financial Conduct Authority (FCA) has issued a fresh warning that some insurance firms may be undervaluing written-off or stolen vehicles when settling claims.
The City regulator said on Wednesday that it had found evidence suggesting customers whose cars had been stolen or written off after an accident were being offered settlements at a lower price than their “fair market value”.
It added that some firms would occasionally give initial settlement offers below or at the lowest estimation of a vehicle’s market value, only raising the offer if the customer challenged it or complained.
The FCA’s announcement comes after it surveyed 12 unnamed insurers which together make up an estimated 70 per cent of the market.
It previously warned companies in December 2022 that undervaluing insured items was against the FCA’s rules and that was ready take action, which can include public censure and financial penalties.
Last July, the FCA ordered Direct Line to review claims where vehicles had been written off “to identify any policyholders who received unfair settlements and provide them with appropriate redress”.
Sheldon Mills, the FCA’s executive director of consumers and competition, said on Wednesday: “Having your vehicle written off or stolen can be intensely stressful and we expect firms to offer the right support to help their customers.
“We expect all motor insurers to take note of our findings and we are engaging directly with those that have issues that need to be addressed.”
Under the Consumer Duty introduced last July, the FCA said firms are required to help customers understand the benefits of their policy with no “unreasonable barriers”, which could include an insurer making low initial offers in anticipation of negotiation from customers.
A spokesperson for the Association of British Insurers told Morning Wire: “We welcome this report from the FCA, although we are disappointed that some customer experiences around written-off or stolen vehicles fall below the standard our members seek to achieve. We will work with our members to ensure that recommendations are taken into account.
“Recent volatility within the second-hand car market has given rise to challenges in vehicle valuations. Our members are committed to improving systems and processes to ensure that customers receive a fair settlement figure.”