The threat of a huge compensation bill looms as the FCA continues its investigation into the write-off valuations offered in the past by motor insurers. It’s one of those issues where everyone who has had a claim settled feels they have a grievance in some way. Either the repair wasn’t done correctly, it took months on end, or the write-off was unnecessary and way too low etc. In some cases, that may well be true and the worst examples of short-changing people by thousands of pounds need to be dealt with of course.
But the brutal reality for insurers – and the public – is that this matter will almost certainly end up being another long-running, PPI style compensation saga. Justice doesn’t come for free, qualified legal people want nice salaries, cars and houses. So add on some legal fees to every sliding scale compensation payout too. But in the end, everyone who insures any vehicle will pay back that valuation compo in higher premiums.
There is no way that insurers can keep a Motor book solvent if they have to pay back millions every year, whilst freezing premiums. Neither the FCA, Financial Ombudsman, or politicians keen to win votes, can square that circle. Premiums will rise to cover the projected payback, or some FCA administered `voluntary’ scheme that might be set up after the next GE. That would be a nice extension of powers for the FCA, operating on behalf of the government, effectively collecting revenues from insurers and then holding onto it before deciding who gets what.
Some consumers will feel happy that they will receive`free’ money, but it isn’t. It’s really just loaned money, like furlough wages during Covid. You’ll pay it all back in higher prices. That’s how the world works.
Meanwhile, here’s the latest from the FCA;
The Financial Conduct Authority (FCA) has identified shortcomings in how some motor insurance firms are valuing written-off or stolen vehicles. An FCA review has found evidence that suggests 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.
This comes despite the FCA’s previous warnings that insurers must not undervalue cars or other insured items when settling claims. The regulator is engaging with the firms included in its review to ensure they make improvements to address the FCA’s findings.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA 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.”
Insurers must handle claims promptly and fairly under FCA rules. Following the introduction of the Consumer Duty in July 2023, firms are also required to ensure consumers are at the heart of their business and must act to deliver good outcomes for them. Customers who think their claim may have been undervalued can complain to their insurer and then to the Financial Ombudsman Service if their complaint is not resolved.
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