On 27 March 2024, the UK Financial Conduct Authority published its findings into its review of firms’ claims-handling processes for valuing vehicles which have been stolen or written-off (often called ‘total loss’ claims).
Some of the key points are:
– Firms must deal with total loss claims promptly and fairly and in line with their obligations under ICOBS 8.1 leading to firms “identifying a fair estimate” of a vehicle’s market value.
– valuation of vehicles:
* The FCA found some good practice including firms offering settlement values closely aligned to retail prices and the firms used the same guides for valuations as the Financial Ombudsman Service.
* The FCA found some areas for improvement including examples of firms offering values lower than available guide prices, firms making deductions based which could lead to unfair customer outcomes and making ‘initial offers’ which are not the firms’ best offers.
– communicating an initial offer:
* The FCA found good practices of initial offer communications clearly explaining the settlement offers and such offers giving customers an opportunity to give additional information relevant to valuation.
* The FCA found some areas for improvement including ensuring communications do not dissuade customers from challenging valuations.
– handling disputed valuations:
* The FCA found good practices of firms allowing customer to provide additional information relevant to valuation and, where a customer rejects a revaluation, most firms treated such challenges as a complaint.
* The FCA found some areas for improvement including not discouraging customers from disputing valuations and not having enough MI to show that a revaluation did not result in systematically different outcomes for customers.
– outsourcing: the FCA found several areas for improvement including: (a) having better oversight arrangements, (b) better managing conflicts of interest and (c) ensuring that outsourcing did not lead to systematically different customer outcomes.
– treatment of policies after a claim settlement:
* The FCA found some good practices including most firms giving customers the opportunity to substitute a vehicle on the policy for the rest of the term.
* The FCA found some areas for improvements including firms requiring customers to pay the remaining premium from the settlement rather than allowing customers to continue making monthly payments of the premium.
– management information and data collection: the FCA found areas for improvement including (a) collecting basic data on total loss claims, (b) monitoring the average deviation between vehicle valuations and guide prices and (c) demonstrating that appropriate MI was collected and analysed to ensure different approaches do not lead to systematically different customer outcomes.
Insurance firms, and third parties providing insured valuation services, will need to quickly digest the FCA’s findings and make changes (where relevant) with a clearly documented rationale for any steps taken by them. The FCA is likely to pick up all of these themes in any future engagement with such firms.