The UK’s financial regulator has warned insurers not to undervalue cars and other property when it comes to making payouts to customers.
The Financial Conduct Authority said on Friday that it had seen evidence that customers whose cars had been written off in a crash were being offered a payout lower than the vehicle’s fair market value — and in some cases were only increasing the offer when a customer complained.
The insurance industry is battling rampant claims inflation as a surge in the price of vehicles and parts erodes their profit margins. The regulator acknowledged that insurers were under “increasing pressure”, but warned them that they should consider the impact of inflation when they offer cash settlements.
“When making an insurance claim, people shouldn’t need to question whether they are being offered the right amount for their written-off car or other goods that they need to replace,” said Sheldon Mills, the watchdog’s executive director for consumers and competition. “This is especially important now as people struggling with the cost of living will be hit in the pocket at precisely the time they can ill-afford it.”
The regulator would “act quickly to stop firms and prevent harm to customers” where it detects such activity, he said.