FOS warn that insurers undervalue written off vehicles
The Financial Ombudsman Service (FOS) have reported a 29% rise in the number of complaints received regarding motor insurance last year. One of the main source of complaints was that insurers were undervaluing vehicles that had been written off.
The FOS warned that some insurers were using the trade price to value a written off vehicle, rather than the retail price. The trade price reflects what a car dealer would pay for a vehicle, not a customer.
However, the Association of British Insurers argued that values of vehicles across the used car market have been fluctuating and many owners overestimate the value of their cars.
Insurers are supposed to offer a payout that covers the cost of replacing a written off vehicle.
This is calculated by estimating how much it would have cost to replace a car at the time it was written off. It doesn’t equate to how much the car was worth when it was bought, but takes into accounts factors such as age, condition and mileage.
Experts indicate that if an insurance company doesn’t meet the customer’s valuation of their vehicle, they should find a fair price for the equivalent car on the internet. People should take into account mileage, condition and service history and compare their valuation to other cars that are up for sale in their local area.
Customers should then send these details to their insurance company and argue their case. If they still can’t agree a valuation, they should consider contacting the FOS.
David Cresswell from the FOS indicated that many companies do not follow the rules and that about half of the complaints they received were upheld in favour of the customer, adding: “That is usually because the insurer has used the so-called trade price. That is the price that a dealer would pay. That would be hundreds of pounds less than the retail price you would pay on a garage forecourt. This is not really acceptable.”