On Wednesday, the Financial Conduct Authority (FCA) issued a notice instructing the British insurance giant Direct Line Insurance Group to carry out a review of total losses where vehicles have been written off in order “to identify any policyholders who received unfair settlements and provide them with appropriate redress”.
In a notice on its website directed at customers whose vehicle was written off in the five-year period between September 1, 2017, and August 17, 2022, Direct Line admitted that some of these car and van insurance customers “didn’t receive as much as they should have done”. The provider said it is working to identify everyone affected.
The notice clarified that: “Customers don’t need to contact us, either directly or via third parties. We’ll contact affected customers directly to put things right.”
In a Press release responding to the review, Direct Line acknowledged the coverage of the past business review of motor total loss claims that the group is undertaking and the time period of the review.
“An estimate of potential payments the group will make as a result of the review was provided for within the group’s 2022 financial year end claims reserves,” the insurer said. “The group does not expect the review to have a material financial impact in 2023.”
The notice by the FCA is the latest in a string of setbacks to hit the FTSE 250 insurer which announced in January that its final dividend for the 2022 financial year had been cancelled. The market’s reaction to the news led to a rapid dip in its share price, with CEO Penny James later stepping down from her role on January 27.
In May, acting chief executive Jon Greenwood highlighted that while the 2023 earnings outlook continues to be challenging, the group is continuing to take the actions required to drive business performance and stated that its continued ambition over time is to generate a net insurance margin of above 10%.
The FCA’s notice to Direct Line follows a warning it delivered to the insurance market in December 2022 against undervaluing cars or other insured assets when settling insurance claims – particularly during the cost-of-living crisis.
At the time, the FCA identified that it had seen evidence of consumers being offered a price lower than their vehicle’s fair market value after it was written off due to an accident. In some cases, the watchdog said, claims staff were only increasing that offer to the fair market price when a consumer complained.
Commenting on the issue, the FCA’s Sheldon Mills, said: “When making an insurance claim, 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.
“Insurance firms should offer settlements at the fair market value. This is especially important now as people struggling with the cost-of-living will be hit in the pocket at precisely the time they can ill afford it. We are watching the behaviour of firms closely and will act quickly to stop firms and prevent harm to consumers where we see it.”
