Don’t let insurers short-change you

INSURERS have been short changing drivers for years by routinely undervaluing vehicles that were stolen or written off after a crash.

They also wriggle out of car, home and travel claims by using exclusion clauses that are not always enforceable.

But you don’t have to take their word for it – because the financial watchdog is on the case.

I interviewed one of the bosses at the Financial Ombudsman Service about these issues on my LBC show last week.

Here are the key points of interest:

WHAT IS THE FINANCIAL OMBUDSMAN SERVICE?

The Financial Ombudsman Service (often referred to as the FOS) describes itself as a free and easy-to-use service that settles complaints about financial services. It says it “resolves disputes fairly and impartially, and has the power to put things right”.

People use the service when they have a dispute with their bank, card provider (often about a billing issue or rejected Section 75 claim), lender or insurance company.

As was explained during my interview, the FOS can also deal with complaints about debt collectors.

THE PROBLEM OF UNDERVALUING

If your vehicle is stolen or written off and your insurance provider accepts that you are covered, it makes an assessment about the value and this forms the basis of your payout.

Countless consumers have contacted me over the years complaining that the company’s figure is far lower than the true market value.

I asked Tim Archer, the Ombudsman Director, how he deals with these complaints and I was more than happy with the answer. The ombudsman service uses several well-known and upto-date vehicle valuation guides and ultimately determines what the true and current value of the vehicle is.

Looking at the complaint stats released by FOS it would appear this exercise falls in favour of the consumer more times than not.

It was also good to hear that the regulator, the Financial Conduct Authority (FCA), has picked up on this issue too and has written to insurers telling them to stop this practice.

The FCA says it has evidence that some people who had their cars written off after an accident are being offered sums lower than the vehicle’s fair market value, which is not allowed under its rules.

Sheldon Mills, the FCA’S executive director for consumers and competition, says: “Increasing business expenses add pressure on insurers to control claims costs and offer cash to settle instead of paying for vehicle repairs – a move that may not be in the best interest of customers.

“Insurance firms should offer settlements at the fair market value. 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.”

EXCLUSION CLAUSES

Every insurance policy has exclusions, effectively of events or circumstances that the policy will not cover, and these are often used to deny claims.

Clearly these are key terms and the Consumer Rights Act 2015 states that they must be made prominent before the contract is entered into.

Tim Archer, of the FOS, explains that where a provider has rejected a claim due to an exclusion, the ombudsman would want to see evidence that the exclusion was clearly communicated to the consumer and, in most cases, this would mean it being clearly visible on the summary page.

The FOS also says that exclusions are not always relevant and used the example of a burglary.

Policies often state that all the windows in a house must be locked so an insurer rejected a claim because one of them wasn’t.

However, it transpired that the thieves managed to force their way in through one that WAS locked – and it was another window that was unsecured.

The FOS determined that, while unlocked windows fell within an exclusion, on this occasion it had no impact as the window in question was locked.