When a car, van or motorhome is declared a total loss due to theft or an uneconomic write-off as a result of an accident, the next stage is to negotiate an insurance settlement with the insurer.

As insurers are financial institutions that want to minimise their losses and maximise profit, ‘market value’ write-off valuations are sometimes too low. Settlement offers couched in quite vague terminology can be lower than real-world replacement costs and this can lead to policyholders opening disputes with the Financial Ombudsman Service. I regularly support policyholders in such cases.

Insurers not valuing write offs fairly

A recent survey by the Financial Conduct Authority of 12 insurance companies that together made up 70% of the market showed that insurers had been offering policyholders less than their written-off or stolen vehicle is worth and in some cases only raising the offer when a complaint is made.

The review didn’t examine individual cases, but the FCA said it considered that the low average settlement figures indicated that some customers’ claims may have been handled unfairly.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “Having your vehicle written off or stolen can be intensely stressful and we expect firms to offer the right support to help their customers. We expect all motor insurers to take note of our findings and we are engaging directly with those that have issues that need to be addressed.”

Insurers are obliged to handle claims promptly and fairly under FCA rules, said the watchdog. Customers who think their claim may have been undervalued can complain to their insurer and then to the Financial Ombudsman Service if the matter isn’t resolved.

Insurance Write-Off Valuation Reports

Having been through the Ombudsman process myself some years ago and received a settlement of less than half the true cost to replace the vehicle, things have not greatly improved in the 15 years since my claim. Perhaps unsurprisingly, I advise taking a independent professional opinion into the case review. In some cases, I advise avoiding the Ombudsman and going straight to a solicitor who knows how to handle the full spectrum of loss.

I provide expert valuation reports suitable for both the Ombudsman and independent legal action in court. When the report has been necessitated by an insufficient settlement offer, the cost of the report is usually refunded by the Ombusdsman and any court action can include a claim for costs. Watch my video below to learn more about my work in this area.

Case Study: Audi S4 Estate insurance write off – 40% increase in payout

In November 2022, I received an email from a doctor in London whose 2017 Audi S4 Avant had been damaged in a road traffic accident and written off by the insurers. The final settlement offer from his insurance company was £24,000. He felt that this was not sufficient to replace the car and commissioned one of my expert valuation reports for the market value of his car in pre-accident condition.

My report valued the low mileage, high specification Audi S4 at £35,500. He presented the report to the insurer and they increased their valuation to £30,000. As this was insufficient to replace the car, he received an interim payment for the £30,000, while also pursuing an appeal with the Ombudsman.

The Ombudsman carried out its own research, found that the insurance company had not correctly or fairly valued the car, failing to adjust for the very high specification and low mileage. Their highest guide price on the vehicle, adjusted for mileage and specification was £32,250. The ombudsman awarded the doctor £33,875 as the average of the highest guide price and my recommendation.

The ombudsman stated: “I have reviewed the specialist valuation report provided by the doctor which valued the car at £35,500. Given its reputable source and how comprehensive it is, I’m persuaded that this needs to be taken into account.” While the ombudsman did not award the full valuation I recommended, deciding instead to pay the average of the my report and the next highest valuation, which also made some adjustment for options, my report was instrumental in achieving a much higher settlement figure: over 40% higher than the original final offer.

The ombudsman also stated that “had the insurer provided a fair valuation initially, the doctor would not have had to pay £400 for the specialist report. As such, we recommend that the doctor be reimbursed for the cost of the report, subject to his providing an invoice/receipt.”

This was a significant result for the policyholder and he asked me to share this story to encourage others to follow his example. While it took months to go through this process, the increased payout of almost £10,000 on the original valuation, and a refund for the cost of the report proved that the report was money well spent.

If you are in the same position, then having an independent expert report for use in the Ombudsman’s research and deliberation is well worth while. Contact me to discuss your situation.