- The FCA has fired yet another warning shot at car insurers for underpaying
- Many firms are still getting away with underpaying motorists for totalled cars
Car insurers are ripping off drivers by paying them less than the value of their written-off vehicles, the city watchdog has said.
Written-off cars are those either damaged beyond repair or past the point of being economical to fix.
In these situations insurers are meant to pay a fair cash value for the vehicle, but many insist on lowballing customers.
A review by the Financial Conduct Authority (FCA) found that some insurers only increase these low offers when a customer complains.
This is despite the FCA warning insurers not to undervalue cars or other insured items when settling claims.
The FCA issued a similar warning shot to car insurers in 2022, and systematic low insurance payouts had been reported on by This is Money as far back as 2011.
The regulator did not name which insurers were guilty of underpaying consumers for totalled cars, but did say it was ‘engaging’ with the firms involved.
FCA executive director, consumers and competition, Sheldon Mills said: ‘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.’
What are my rights if my car is written off?
If your car is damaged to the point it cannot be driven or fixed for a decent price, insurers are meant to pay you a fair sum that will buy you a like-for-like car, in similar condition and at realistic prices for your area.
All the insurer should deduct is the excess you agreed to when taking the policy.
Customers who think their claim may have been undervalued can complain to their insurer, and then to the Financial Ombudsman Service (FOS) if their complaint is not resolved.
The crucial information that you need involves as much evidence as possible on the exact details of your car, its condition and important value factors, such as a full service history. You also then need comparable prices for cars in a similar condition on the open market, these can be obtained with screenshots from sites such as Autotrader.
Car valuation tools and quick sale offers often give lower figures than advertised prices and while insurers car argue that buyers can negotiate discounts, these are often not substantial on used cars in the digital era of easy price discovery.
Complaints against car insurers are one of the major reasons for a big spike in cases being handled by the FOS.
When can I complain to the FOS?
The first thing you should do is contact the insurer you have the issue with.
If they do not respond, or you are not happy with the response, you can then complain to them.
If they do not send a response within 15 days, or they do but you think it is unfair, you can then turn to the FOS, which is free to use.