The Financial Conduct Authority (FCA) has seen evidence that some motorists who have had their cars written off after an accident are being offered a lower price than the vehicle’s fair market value and has issued a firm warning to them as a result.
In some cases, claims staff are only increasing that offer to the fair market price when a consumer complains.
Offering a price lower than fair market value is not allowed under FCA rules. The FCA is acting against those firms that it has found breaking its 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.'
The rising cost of living may be putting increasing pressure on insurers to control claims costs but some of the ways that insurers may look to reduce these costs could ultimately be harmful to consumers.
Attempts to control claims costs by making offers lower than the customer is entitled to under the policy is unfair and is likely to disproportionately affect consumers in vulnerable circumstances.
Customers who think their claim may have been undervalued can complain to their insurer and then to the Financial Ombudsman if their complaint is not resolved.
Insurers can offer cash instead of repair or replacement to settle claims. However, settling claims in this way may sometimes not be in the consumer’s best interest if they are not able to easily arrange repairs or replace an item themselves, or if inflation means they lose out in real terms.