How much should a motor insurer pay out for your stolen or written-off car? The Financial Services Ombudsman said this week that complaints against insurers for under-valuation are mounting - but is taking a hard line against drivers who over-inflate the value of their car when making a claim.
In a report published this week, the ombudsman said that while drivers can expect to be given a pay-out to allow them to buy a "car as near as possibly indentical to the one that has been stolen", you can't expect to be paid the prices quoted in local newspapers or the internet.
The ombudsman said: "Customers who dispute the firm's assessment of a car's market value often draw our attention to 'forecourt prices' advertised in local papers, and - increasingly - to prices quoted on internet sites. Generally we place little weight on such evidence."
Advertised prices are just a starting point for negotiation, says the ombudsman, and do not take into account condition and mileage.
Owners who have added special features to their cars will also find the insurer will not cover them.
The ombudsman said: "It is a fact that special features may not add substantially to a car's market value. Indeed, in some extreme cases, they may actually reduce the value."
So what value should you accept for your car? The ombudsman says insurers should consult the "normal trade guides", then allow for differences as a result of mileage or condition.
It released details on a number of complaints, which highlight how simply complaining to the ombudsman will not ensure that you will automatically receive a higher pay-out.
Case one - the low mileage car
Dr M's insurer valued her car at £2,040. She disputed this, saying it cost £7,500 new eight years before and was now worth £4,500. The firm raised its offer to £2,500. Dr M refused the offer, saying the insurer had not taken account of the car's low mileage of just 6,000 miles.
But the Ombudsman rejected the complaint. "Even considering the unusually low mileage, the firm's offer seemed to us to be quite generous. It was more than the car's 'market value' so there was no reason for the firm to increase its valuation."
Case two - new or nearly new?
Mr Q's £18,495 new car was stolen after just one month. But the insurer offered him just £15,564, even though his policy said he would be given a new car if he suffered a "total loss" within 12 months. The insurer said that the car was not "new" as it had been pre-registered with a dealer before Mr Q's purchase.
In this case, the ombudsman supported the complainant. Despite pre-registration, the car had only five miles on the clock when bought by Mr Q. The ombudsman ordered the insurer to increase its offer to the full amount Mr Q paid for the car, and to add interest from the date of the theft.
You can contact the Financial Ombudsman Service at South Quay Plaza, 183 Marsh Wall, London E14 9SR or by ringing 0845-080-1800. Its website is: www.financial-ombudsman.org.uk. In general, the Ombudsman will only look at complaints where you have already reached deadlock with your insurer.
