Britain’s second-biggest car insurer, Direct Line, has been ordered to go back through five years of claims after admitting it had underpaid some customers who had their cars and vans written off.
After an investigation into the car insurance market that began in December 2022, the Financial Conduct Authority (FCA), this week ordered Direct Line to conduct a review of claims where vehicles had been written off “to identify any policyholders who received unfair settlements and provide them with appropriate redress”.
Direct Line, which has recently been accused by customers of upping premiums by 50%-75%, said in a statement that it was reviewing all total loss claims settled between 1 September 2017 and 17 August 2022.
“We expect that this will affect a minority of customers and the vast majority of customers will not be impacted. Customers do not need to contact us, either directly or via third parties, as we will contact impacted individuals to apologise and provide appropriate redress, including interest,” it said.
The review is the latest blow to one of the UK’s biggest motor insurers and follows a string of profit warnings caused by runaway inflation in its claims costs, which prompted the departure of its chief executive in January.
Back in December, the FCA said it had seen evidence that motor insurance customers, whose cars had been written off after an accident, had received payouts lower than fair market value. However, it did not name insurers.
Offering a price lower than fair market value is not allowed under FCA rules and the watchdog said it would take action against companies it found doing this
“People shouldn’t need to question whether they are being offered the right amount for their written-off car or other goods that they need to replace,” Sheldon Mills, the FCA’s executive director for consumers and competition, said at the time, adding that such practices would hit people “precisely at the time they can ill afford it”.
This week’s FCA notice confirmed the suspicion that Direct Line has been offering below-value payouts after customer cars were written off.
Two weeks ago, Guardian Money reported on the case of Leslie Martin from Manchester who complained that Direct Line had offered him a derisory £19,0000 payout after it wrote off his very rare Rolls-Royce.
Forced to spend £32,000 on a replacement, he had valued his car at more than £25,000 but Direct Line has refused to up its offer. At the time, Direct Line claimed it had reached the £19,000 figure after it had approached multiple independent Rolls-Royce dealers.
“The way my claim has been treated has been appalling,” Martin says. “It’s no surprise to me that the company has been called out by the regulator.”
Customers who think their claim has been undervalued can complain to their insurer and then to the Financial Ombudsman if their complaint is not resolved.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.