| Link(s): | FCA finds concerns over insurers’ valuation of written-off or stolen vehicles | FCA Findings of multi-firm review into insurers’ valuation of vehicles | FCA |
Context
The FCA is engaging with firms included in a review that has found evidence suggesting some firms are offering their customers less than their written-off or stolen vehicle is worth and, in some cases, are only increasing that offer when a customer complains.
Key points to note and next actions
In the report, the FCA identified firms offering settlements below the average available guide prices and found unfair deductions being made, including:
- Wear and tear already reflected in the guide price.
- Applying standard deductions for certain types of pre-existing damage without assessing how the damage affects the value of the specific vehicle.
- In policies that define settlement value as the cost to replace with a like-for-like vehicle, applying deductions for cleaning or paint imperfections without justification.
- Deducting 20% from the settlement value of the vehicle that had previously been a total loss in any category, with no indication of having considered individual circumstances.
It also identified some firms knowingly making settlement offers below the value of the insured vehicle’s estimated value or at the bottom of a value range, only increasing the offer for customers that challenged the value or complained. This practice is likely to breach the requirement to handle claims promptly and fairly (ICOBS 8.1.1R(1)) and to act in good faith towards retail customers (PRIN 2A.2.1R), as well as the Consumer Duty by failing to support customers in realising the benefits of their policy without unreasonable barriers.
When communicating offers to customers, firms are warned that they should ensure they are not dissuading customers from challenging the valuation, such as stating its valuation approach reflects the Financial Ombudsman’s approach, giving customers the belief that approaching the Ombudsman would be fruitless.
Firms that handle motor claims and are involved in the process of valuations and offers, should ensure they review the FCA’s report and make adjustments in line with the expectations laid out in the report.