Published On: Wed, Mar 27th, 2024
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Insurers not paying fair value on motor claims says regulator | Personal Finance | Finance

Motor insurers are paying their policyholders less than what their stolen or written off vehicles are actually worth when they make claims, according to the Financial Conduct Authority.

It added that in some cases, insurers only increase the amounts offered to “fair market prices” when customers complain. The FCA said that it had found evidence of insurers under paying claims, even though it warned them in December not to undervalue cars or other insured items when settling claims.

The regulator made its discoveries after examining the claims handling processes of 12 insurers, who together make up an estimated 70% of the market. It said that the low average settlement figures some firms reported “indicate that some customers’ claims may have been handled unfairly”.

Sheldon Mills, FCA executive director for consumers and competition, warned insurers that they are in breach of regulatory requirements if they knowingly make settlement offers below the values policyholders are entitled to.

“Having your vehicle written off or stolen can be intensely stressful and we expect firms to offer the right support to help their customers,” Mills said. “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.”

The regulator said that customers who believe that their claim may have been undervalued can complain to their insurer. If their complaints are not satisfactorily resolved, it said they can take their cases to the Financial Ombudsman Service.

The FCA is currently probing historic car finance deals as it fears that consumers were overcharged by lenders.

Prior to January 2021, some lenders allowed car dealers to adjust the interest rates on loans, which increased the commission payments to them. These discretionary commission arrangements were banned in 2021. The FCA said there have been a high number of complaints from motorists about how much they were charged for their car, van, campervan and motorbike loans prior to the ban.

Speaking at conference earlier this month, FCA chief executive Nikhil Rathi said: “In my view it is improbable we will find nothing to report as we look at historic motor finance sales. Some firms will be better placed than others.“

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