| Link(s): | Insurance providers warned not to undervalue cars or other insured items when settling claims | FCA Dear CEO letter: Our expectations on cost of living and insurance (fca.org.uk) |
Context
Insurance firms have been warned by the FCA not to undervalue cars and other insured items when settling insurance claims, especially during the cost-of-living squeeze.
The FCA has stated in a new web page that it has seen evidence that some consumers who have had their cars written off after an accident are being offered by their insurance providers a price lower than the vehicle’s fair market value. In some cases, claims staff are allegedly only increasing that offer to the fair market price when a consumer complains. Offering a price lower than fair market value is contrary to the requirements of FCA rules, so the FCA is acting against those firms that it has found breaking its rules, and it is watching the behaviour of firms closely to act quickly to prevent harm to consumers where it sees it.
Key points to note
The FCA set out in a Dear CEO letter in September 2022 that it expects firms to handle claims promptly and fairly and they should consider the impact of inflation when they cash settle claims and the likely difference in price for a consumer to replace an item or carry out repairs compared to a firm. 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.
Firms should:
- make sure consumers have enough information to understand the implications of the different settlement options available to them, particularly consumers in vulnerable circumstances
- have adequate systems and controls around claims handling processes
- not incentivise their staff to engage in potentially harmful claims settlement practices
Next actions
If your firm is involved in claims settlement work on behalf of insurers, please ensure that you are familiar with the content of this web page and that you re-visit the Dear CEO letter that was sent last September.