Drivers who have their cars stolen or written off will now have a fair insurance claim sum as the regulator steps in to protect consumers.
The Financial Conduct Authority (FCA) found evidence that some insurance firms are offering customers less than the worth of their written-off or stolen vehicle as compensation.
The research highlighted how in some cases, insurers only increased their initial payment offering after a customer complained.
The numerous complaints prompted the regulator to step in to ensure firms handle claims promptly and fairly.
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Drivers may have been ripped off when receiving compensation
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The FCA had previously warned car insurers that 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.
As a result of the new Consumer Duty measures, the regulator said it's engaging with the firms to ensure they make improvements.
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 which call on firms to ensure consumers are at the heart of their business and must act to deliver good outcomes for them.
As part of the FCA finding, when valuing vehicles as part of total loss claims, firms must ensure they align their approach with their regulatory obligations.
For example, one of the ways the FCA expects firms to act to deliver good customer outcomes is by enabling and supporting customers to pursue their financial objectives through the products they offer.
The review detailed how while some firms offered, on average, settlement values closely aligned to retail guide prices, this was not always the case.
FCA guidelines do not prescribe how firms should establish market value or how far they can deviate from a guide price, but firms should be able to justify their processes and the outcomes for policyholders, the regulator stated.
The review explained: “When determining settlement value, most of the firms reported making deductions based on the pre-accident condition of the vehicle, which we consider may be unfair in some cases.
“Firms should ensure deductions from guide prices reflect the evidence available and can be robustly justified, rather than make blanket deductions of set amounts or percentages without sufficiently considering the individual vehicle.
“Communicating the settlement offer is a vital step in the claims-handling process. It enables customers to review the offer and decide if they want to accept it or dispute it in a timely manner.”
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It is hoped the warning will force insurers to make changes
PADrivers who think their claim may have been undervalued, can complain to their insurer and then to the Financial Ombudsman Service if the complaint is not resolved.