Classic Car Insurance Write-OFf Valuations
Despite all the advice to agree an insurance value on your classic car at the start of the policy, many owners opt for market value policies. When a classic car is later declared an insurance write-off total loss due to theft or 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’ insurance write-off valuations are often too low. Settlement offers are usually lower than real-world replacement costs and this can lead to policyholders opening disputes with the Financial Ombudsman Service. I regularly support owners and policyholders in such cases.
Insurers not valuing vehicle insurance write-off cases fairly
A recent survey by the Financial Conduct Authority (FCA) 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 years since my claim. Perhaps unsurprisingly, I advise taking a independent professional opinion into the case review. In some cases, I specifically 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 FCA’s 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.
Case Study 1: Audi S4 Avant/Estate insurance write-off and a 40% increase in payout
In November 2022, I as contacted by a London doctor whose 2017 Audi S4 Avant had been damaged in an accident and written off by the insurers. The final settlement offer from his insurance company was £24,000. We agreed that this was insufficient to replace the car. He commissioned one of my expert valuation reports for the market value of his car in pre-accident condition.
My report noted that the car had not been adjusted for several factors, including the myriad options that were fitted to the vehicle. My report subsequently valued the low mileage, high specification Audi S4 at £35,500. He presented the report to the insurer, who increased its valuation to £30,000. As this was insufficient to replace the car, he received an interim payment for the £30,000, while also pursuing a case with the ombudsman.
The ombudsman ruled that the insurance company ‘had not correctly or fairly valued the car’, failing to adjust for the very high specification and low mileage. The Ombudsman’s 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 my full valuation recommendation, 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.
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Classic Car Valuations Specialist is part of Specialist Car Valuations Limited: UK company number 13782283. Values on this site are an opinion: markets can go down as well as up.
