"We are watching the behaviour of firms closely and will act quickly to stop firms and prevent harm to consumers where we see it. "
- Sheldon Mills, FCA Executive Director, Consumers and Competition
FCA reports seeing evidence of some consumers having their written-off cars priced lower than the vehicle’s fair market value by insurers when making a claim. In some cases, claims staff were allegedly only increasing monetary offers to the fair market price when a consumer complained.
This report has been deemed unsurprising by Fanny Snaith, a Cheltenham-based certified money coach, who noted that this is “all the more the case given that the value of second-hand cars has risen considerably since the Pandemic.”
“This FCA report doesn’t surprise me in the slightest. Many insurers have tried to get away with the lowest valuations possible as long as cars have been on the road, and that will likely continue,” Snaith added.
This practice of offering a price lower than a fair market value is not allowed under FCA rules,, especially since the Dear CEO letter issued earlier this year.
This letter highlighted that the FCA expects firms to handle claims promptly and fairly and that there should always be a consideration for the impact of inflation when they cash settle claims as well as the likely difference in price for a consumer to replace an item or carry out repairs compared to a firm. This letter was part of the FCA’s strategy to deliver good outcomes for consumers in the UK’s financial services industry.
Similar to this letter, FCA’s most recent warning highlights just how important handling claims fairly is for the consumer in the current economic landscape. Although the rising cost of living crisis may be putting pressure in insurers to control claim costs, some of the ways insurers may be looking to reduce these costs can be ultimately harmful to the consumer.
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, reports FCA.
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.
Commenting on the undervaluing of cars and other insured items, Sheldon Mills, FCA Executive Director, Consumers and Competition, has 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.”