Car Insurance settlements are ‘undervalued’ says Financial Ombudsman Service

Published 23 October 2013

Three quarters of car insurance settlement offers are undervalued, according to research from the Financial Ombudsman Service (FOS) and ALA Insurance Services.

The FOS has reported a seven per cent rise in car insurance complaints between 2012 - 2013, with the majority of correspondents relating to undervalued offers in the event of a write off or total loss.

Between April 2012 and March 2013 there were 7785 complaints to the FOS relating to motor insurance, with roughly half of these upheld in the favour of the consumer. In the previous year (2011/12) there were accusations by the Ombudsman that insurance companies were in fact offering valuations based on trade value rather than retail.

Market commentators suggest that trade in values are, on average, £1400 lower that market value, leaving thousands of claimants out of pocket.

Despite the rules being clear, some insurance companies are not following them

David Cresswell of the Financial Ombudsman Service said: “Despite the rules being clear, some insurance companies are not following them. We uphold about half of complaints [we receive] in favour of the consumer. That is usually because the insurer has used the so-called trade price. That is the price that a dealer would pay."

A number of fully comprehensive car insurance policies only offer new car replacement during the first 12 months of ownership. If a car is written off after the 12 period the pay-out is likely to leave the customer out of pocket.

GAP insurance is designed to cover the depreciation of a vehicle and pay the difference between the market value settlement and the original price paid for the vehicle.

ALA is one of the few GAP insurance suppliers that doesn’t include market value reduction clauses. They pay the complete difference between the insurance company’s settlement and the original price paid for the car – regardless of what the insurance company settles at. 


Inside Insuracne    on 24 October 2013

That is not strictly true, there are companies who have no market value clause what so ever however if you read the ALA is not one of them. If you read the policy their terms state that if you accept an offer which is less than market value that they do not have to pay you any more and their liability will not increase.
They may well pay from the insurance companies settlement however that is not what the terms and conditions say.
Small point but also the FOS changed to the FCA in April this year.

Insurance Knowledge    on 24 October 2013

Sorry, that makes no sense. I'm pretty certain the FOS and the FCA are independent from each other, and have not merged at any point. Do you mean the FSA changed to the FCA in April this year? Cause that did happen, and is a completely different body to the FOS.

Craig_    on 25 October 2013

All insurance is a scam, pure and simple. Every insurer is only interested in minimising their costs, and their payouts to you. The only way around this is to make it a state-provided service, which the government should hurry up and do, but won't as they are filthy tories.

Aviva & FOS Victim    on 10 November 2013

The Bias & 1 sided approach of the FOS is very evident
& clear.

They preach they are industry funded, ignoring that our
premiums will cover that outlay the following year.

The FOS will not investigate certain matters if claimed by
the individual ie Fraud, Maladministration, breaches of the FCA codes, gross negligence even when it is highlighted that the ‘act or omission’ is within their duty to investigate under the Financial Services & Markets Act 2000 & admitted by the business.

Under valuing a claim is ‘gaining an advantage
by deceit’. Which is Fraud.

The FOS will happily investigate fraud if the Business
claims it, hence max benefit to the Business.

The FOS allowances are pennies on the £ by comparison to the Law position. Check what the FOS offer for for distress,
inconvenience or other non-financial loss against the LAW:

Axa vs Cunningham Lyndsey

It is striking that you cannot place a comment on the FOS site. I
assume that is so individuals cannot highlight the FOS does not apply its own methods.

The FOS are there to profit from the misery claimants are in, minimizing Business outlay. It is morbid that their growth is maximized by additional consumer protection removal!

It says enough that the Ombudsmen are meant to be independent from the businesses they are supposed to investigate, however the rules they are to follow can be set be the Board members of the Businesses they supposedly investigate! Go figure.

Go to the FOS for; penny on the £ decisions, the loss of the will to live, incompetence, clear bias towards the businesses they are supposed to investigate, total ignorance of the damage the
businesses cause.

Do not fall under the illusion that the FOS is for Consumer protection. I have it in writing that their role does not include consumer protection.

Which is worse the greedy business who’s default position is repudiate, in the knowledge they have a bank balance you can’t fight against, or the company set up to ‘police’ the situation that assists the business, only interested in its own self growth?

In that situation full investigations & decisions incorporating the full extent of the law wouldn’t be productive for growth, would it?

How can the FOS be trusted when their refusal to investigate results in more work through greater rule breaking. Catch 22, proven by the FOS exponential growth.

The dramatic rise in claimants going to the FOS, shows the FOS is failing the consumer & benefiting the Businesses they are supposed to ‘police’.

Last point, if the FOS was working, do you not think the business would be kicking up a stink?

Welcome introduction to the FOS where your pain & suffering is our reward! Where our incompetence ensures business compliance, our bias ensures complaint growth through consumer protection erosion.

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