Insurance companies blasted for low payouts

  • 7,238 complaints for low insurance payments
  • Trade body says insurers are breaking rules
  • Use our car valuations to get the right price

Insurance companies are not sticking to the rules regarding payouts for written-off vehicles, says a trade body that has been flooded with complaints from disgruntled consumers claiming they’ve been given wrong car valuations.

In 2011 7,238 people made complaints the Financial Ombudsman Service, which is a rise of 29% compared to the previous year.

The bulk of the complaints were about the size of payments following claims for written-off vehicles. The FOS said insurance companies were not playing by the rules, paying the trade price rather than the retail price for a written-off vehicle to their customers. The trade price is usually much lower than the retail price, and this practice, under industry rules, is not allowed.

Victoria Roberts, 36, of Hertfordshire, was offered £900 from her insurance company after her Mazda MX-5 Eunos was involved in an accident in London. After making investigations into the true value of her car, she complained and threatened to take legal action. Eventually the insurance company offered her £2,200, which she accepted.

She told Parkers: “It was outrageous. I knew the car was worth much more than that but they were insistent. When I looked at values of similar cars for sale on numerous websites it was clear I was due a lot more. I complained and they ignored me. When I threatened to take legal action they soon changed their minds. They were just trying to pull a fast one.”

David Cresswell, of the Financial Ombudsman Service, said some insurance companies were not following the basic rule that they should offer the same amount of money for a car of a similar age and mileage.

“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,” he added.

“It should be remembered that the price a vehicle is advertised for sale at is not the same price that someone might pay. That would be hundreds of pounds less than the retail price you would pay on a garage forecourt. This is not really acceptable.”

The Association of British Insurers (ABI) claimed policyholders were often unrealistic about the value of their vehicles, however.

A spokesman said: “The public can overestimate their own vehicle’s replacement value. It should be remembered that the price a vehicle is advertised for sale at is not the same price that someone might pay – second-hand car dealers may overstate the price in a newspaper or trade magazine, but accept much less when negotiating.”

Parkers Top Tip:

If you think your insurance company is trying to fob you off with a low payout on your written-off vehicle use our valuations service: it will give you a run-down of your vehicle’s value including trade, retail and private prices.