FCA urged to crack down on UK car insurance claim valuation ‘lowballing’

Which? has called on the financial regulator to ‘toughen up’ its car insurance consumer protections after it found drivers were ‘dissatisfied’ with write-off valuations

Car insurance symbolised by two toy cars hitting each other on top of a calculator
Car insurance costs have soared over the last two years
(Image credit: Getty Images)

The Financial Conduct Authority (FCA) has been urged to crack down on car insurance firms that offer lower-than-expected payouts to their customers.

Which? has called on the financial regulator to act after its research found widespread dissatisfaction with insurers’ valuations of written-off or stolen vehicles. 

A third of the UK’s biggest providers were rated poorly for their settlement values, according to a survey undertaken by the consumer watchdog.

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It comes only days after the FCA said it was concerned about some of the valuations being made by motor insurers

In a review published on 27 March, the City watchdog found evidence of practices it described as “unfair”, including insurers undervaluing written-off or stolen vehicles and then only increasing their offer once a customer complained.

Car insurance premiums have soared over the last two years, with recent data showing costs had soared 46% year-on-year. Even drivers with large no claims records have been hit by the price hikes.

Which?: Car insurance ‘lowballing’ leads to low satisfaction ratings

Which? has said the FCA needs to toughen up its stance on the car insurance market in the wake of its poll of 2,793 policyholders who have made a claim in the past two years.

Conducted in November 2023, the survey found eight out of 24 major insurers received two out of five stars for their valuations when a claim was made. The eight firms were:

  • AA
  • Admiral
  • Bank of Scotland
  • First Central
  • Halifax
  • Quotemehappy.com
  • Sainsbury’s Bank
  • Swinton Insurance

Which? said NFU Mutual did not have a large enough sample size to receive a customer rating, and was therefore not included in its research.

One example of lowballing that the consumer watchdog said it had seen involved a couple who had been involved in a car accident in February when another vehicle had driven into their second-hand Kia Sportage, writing it off.

Despite having bought the car for £12,395 in November 2023 - a figure that the couple had then included in their policy when they took it out - their insurer, Hastings Direct, initially offered them £8,400. They refused this initial offer, and another one of £8,610.

Hastings then asked its own expert to value the car, and came up with a third and final offer of £9,285. This figure was £3,100 below what the couple paid, and £885 above the insurer’s first offer.

In response, Hastings Direct told Which?: “We aim to settle claims quickly and fairly and in line with the current market value of a vehicle that is written off. In this case, we made an initial offer based on the vehicle information available.

“However, following receipt of further information about the vehicle, including an engineer’s report and photos, we offered an updated offer of £9,300 to the couple and they accepted this amount. We have apologised for the payment delay and are pleased the couple are happy with this outcome.”

Hastings Direct was not one of the eight car insurance firms singled out by the consumer watchdog in its November survey.

FCA urged by Which? to ‘toughen up’

After its review found evidence of some “unfair” practices in the car insurance market, the FCA said it was in the process of “engaging” with the firms it had looked at.

It said it wanted to “ensure they make improvements” and “address” the findings of the regulator’s report. It is understood that the regulator has previously taken action against firms which it has found were undervaluing car insurance claims. But MoneyWeek has not seen any evidence of what this enforcement entailed and which insurers were hit by it.

But Which? said more action was needed, and that the FCA ought to name names as the insurers it had analysed in its review had been made anonymous. The consumer watchdog’s director of policy and advocacy, Rocio Concha, said: “Claiming for a car accident is already a stressful ordeal, but our research suggests it’s becoming even more so due to insurers offering low payouts.

“It’s concerning to see that a third of firms analysed are rated poorly by customers for their payout values, despite repeated warnings from the regulator not to undervalue cars when settling claims.

“There is ample data available to firms and regulators on car values by age, and firms are obliged under the Consumer Duty to demonstrate fair value. The FCA must now insist that firms take action to assure customers they will get a fair price for their vehicle should they need to claim, without undue hassle or needing to complain to get a better offer.”

The FCA did not directly respond to Which?’s call for further action. Instead, it pointed to a comment given by its executive director of consumers and competition, Sheldon Mills, when it published its review. He 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.”

How to complain about your insurer

Insurance customers can complain to their provider if they are unhappy with how a claim has been treated.

The insurer must consider your complaint within eight weeks

If you are still unhappy, consumers can complain to the Financial Ombudsman Service (FOS) if they believe a complaint they have made to their car insurance provider isn’t handled to their satisfaction. 

Last week, the FOS revealed it expects to receive almost 50,000 complaints about car insurance over the next 12 months.

Henry Sandercock
Staff Writer

Henry Sandercock has spent more than eight years as a journalist covering a wide variety of beats. Having studied for an MA in journalism at the University of Kent, he started his career in the garden of England as a reporter for local TV channel KMTV. 

Henry then worked at the BBC for three years as a radio producer - mostly on BBC Radio 2 with Jeremy Vine, but also on major BBC Radio 4 programmes like The World at One, PM and Broadcasting House. Switching to print media, he covered fresh foods for respected magazine The Grocer for two years. 

After moving to NationalWorld.com - a national news site run by the publisher of The Scotsman and Yorkshire Post - Henry began reporting on the cost of living crisis, becoming the title’s money editor in early 2023. He covered everything from the energy crisis to scams, and inflation. You will now find him writing for MoneyWeek. Away from work, Henry lives in Edinburgh with his partner and their whippet Whisper.