Insurer’s tricks to get their way.
What is a write-off?
If someone tells you they’ve written off their car, you can safely assume they’ve been involved in a fairly major incident – vehicle beyond repair, fit only for scrap. But, if you hear of an insurance write-off, there’s a reasonable chance the car isn’t the twisted tangle of metal you might have envisaged.
Insurance companies are within their rights to write off a car, even if it has suffered only relatively minor damage, perhaps a few scratches to the paintwork or a small dent. If insurer considers the cost of repairs to be uneconomical, usually around 50% of the vehicle’s value, it will most likely be declared a total loss or a write-off.
When, after an accident, your car is written off, the pain of any injuries can be compounded by the dirty tricks of insurers.
The rules for dealing with written-off cars are clear. The industry body, the Association of British Insurers, says car insurance companies must offer you a proper payout for the value of your car.
This means you must be offered a sum that will allow you to buy a similar car in a similar condition in your local area.
All the insurer should deduct is the excess you agreed to when taking the policy. Let’s say your car is worth £10,000 and is written-off in an accident. The insurance company might offer a settlement of £10,000, less the excess of £300, to give you £9,700.
The problem is that car prices are negotiable, and it is rare for the driver and insurer to agree, after a car accident, on what a car is worth.
Insurers play on this. They know you are likely to need a new car quickly, so they pile on the pressure to get you to accept a payment.
So where does that leave you? Is there anything you can do if you don’t agree with their evaluation of the situation?
What if I don’t agree with the decision to write-off my car?
Insurers are sometimes sneaky and offer low valuations. Consider the first offer they make to be a starting point in negotiations!
Remember, the insurer CAN`T take ownership of your car, until you accept the settlement figure. So don’t agree to a price you’re not happy with.
They have tricks at their disposal to get their way:
TRICK 1: THE CRAFTY OFFER
The insurance company offers a payout that is close enough to the actual value of your car to be realistic, but low enough to save it a few hundred pounds.
Frequently, this will be a trade price. This breaks ABI guidelines, because it is not a price a normal person could realistically expect to pay.
Sometimes, the settlement will be based on a general valuation of your type of car that gives no consideration to your region or the season.
In some parts of the country, certain vehicles will cost more. For instance, Land Rovers may be in higher demand in rural areas, so the cost is likely to be higher.
Some cars have seasonal price variations.
Soft-top cars get more expensive in spring and summer, so you should not accept a valuation, based on what it would be worth in February.
TRICK 2: THE CHEQUE
After a car accident, frequently an insurer will phone, telling you the car is a write off.
Then a cheque with their estimated value will arrive in the post.
This is normally accompanied by a letter, saying that by cashing the cheque you are agreeing to the settlement and cannot challenge it.
Insurers hope that, by avoiding any discussion, drivers will think the settlement cannot be negotiated.
This has caught several motorists, who believe they have been left with no recourse to complain, having cashed the cheque without realising the consequences. Unfortunately, this is grey area. The Financial Ombudsman Service expects insurers to be up front about the implications of cashing a cheque.
But beware — drivers who cash in a payment are usually seen as accepting the settlement.
TRICK 3: COURTESY CAR
Most insurance companies will offer a courtesy car when yours is written off after a car accident, usually for a fixed period, such as a fortnight. Don’t be fooled into thinking you can have a courtesy car, until your dispute is settled.
Normally, four days after your settlement cheque arrives, you will be expected to hand it back, whether or not you accept the payment.
This pressures drivers into accepting the payout, because they need transport.
TRICK 4: THE CONDITION REPORT
The condition of a car can be a stumbling block. Motorists have said how insurers have refused to believe a car is in good nick, or claim it was more damaged than it was.
The Financial Ombudsman says, if an insurer tries to deviate from the value in a car price guide, then in any dispute, it would ask for specific evidence why they felt this was appropriate. A spokesman said: ‘It is expected that cars driven for a number of years will show signs of wear and tear. We would not expect to make deductions for minor imperfections that have been as a result of wear and tear’. Be wary of engineers appointed or employed by the insurance companies.
The Ombudsman has seen examples where engineers employed by insurers have put a car into a lower insurance category for relatively minor marks or dents to a vehicle.
However, you need to be realistic.
Cars can devalue quickly. Your expectations must be based on the current retail value, not on what you paid for the vehicle.
Some drivers get attached to their cars, but this ‘love’ doesn’t mean you should get more money after a car accident.
Likewise, your own improvements do not add value. Some modifications can decrease it— ‘go faster’ stripes on a family saloon, for instance.
TRICK 5: MAKING YOU PAY
Normally, if you complain enough, the insurance company will offer a slightly increased settlement. But this can be way off the amount you still expect.
Then the insurer offers the help of an independent assessor.
You will be told that, for a small non-refundable fee, you can employ an assessor to value your car. The problem is that most insurers know drivers will be so fed up with the situation, by now, they relent. Many also don’t want the added cost.
The assessor’s verdict also comes with a clause. If they find the valuation to be below yours, you will only get the original settlement offer, not an increased offer.
And what about the independence of these assessors?
WHAT YOU CAN DO
Before you consider any offer, look up prices for similar vehicles in motor trade guides and browse the local dealers.
If you don’t think the insurer’s offer is a realistic reflection of the car’s value, contact the firm and use the evidence to back up your claim.
Include information on the service history and anything else that is likely to affect the value. You might recently have bought a new set of tyres.
You could even pay for an independent engineer’s report. However, this will cost you, so do your sums first to work out whether it’ll be worth the extra outlay.
Don’t forget the payout is based on the value of the car immediately before the accident. You should not expect to receive the price you originally paid for the car.
If my car is a write-off, can I buy it back?
Sometimes, you may buy back your car from the insurer after it has been written off. You need to let your insurer know you want to do this at the earliest possible opportunity.
Once a settlement figure has been agreed, the insurer takes ownership of the vehicle. This means it has this asset it needs to somehow get rid of. In this instance, you buying it back could offer the perfect solution for both parties.
However, not all insurances are willing to do that, as they can get more for your car through an auction sale.
Before you agree to buy the car back
It’s best to get an independent body repair specialist to give it the once over, so you have a good idea of what you’re considering paying for.
And stay in contact with your insurer throughout the entire claim process. Keep them informed of your interest to buy, then it’s down to you to negotiate the best deal you can.
What if the write-off valuation won’t cover my car finance?
If you have bought a car on finance, and it’s been written-off after an accident, you could find the settlement figure offered by your insurer doesn’t cover the outstanding repayments on your finance deal.
An offer below the car’s market value must be discussed with your insurer. Provide the evidence and explain why you don’t think the offer is a fair reflection of the car’s value and come to a compromise on price.
If the insurer’s market value looks to be right and the price difference is due to high interest repayments on the car finance, you must take this up with the finance company and come to an arrangement.
It could be worth explaining the situation to both the insurer the finance company. You may be able to use the settlement money to buy back the vehicle and cover the repair bill yourself. This means you’ll still have use of the car and can continue to make your finance repayments.
If the finance company is happy for you to use the insurance money to buy a replacement car and keep up the usual finance repayments, that could be another option.
If you get a new car, it’s worth taking out gap insurance to cover any shortfall between the price you paid for the car and its current market value.
Take it to the Ombudsman
If the insurer won’t budge on the size of the value it will pay, you can take your case to the Financial Ombudsman Service (FOS), which is free and independent.
The FOS upholds about 50% of consumer complaints, so it’s often worth a try if you think you’ve got a valid case.
There were 7,238 inquiries to the Financial Ombudsman Service in 2011.
The ombudsman has accused insurance companies of valuing by trade price –the amount a dealer would pay –rather than retail price.
Do your homework
- Look on-line and ask local dealers what similar cars are worth.
- Get written confirmation of these values and print any internet pages. Tell the insurer you are being realistic and explain why you believe your car is worth more than the settlement.
- Remember that adverts from car dealerships can have inflated prices. The Ombudsman says: ‘Consumers should be aware that the price advertised by motor dealers is often a starting place for negotiation rather than an indication of the correct retail price’. LOOK at the trade guides, such as Parker’s, Glass’s, or Capcalc. (not all are available to the public)
- Don’t let the insurer bully you.
- Avoid cashing the settlement cheque. If you need the money, tell the insurance company in writing you are only accepting it as an interim payment.
- Check the small print of your policy to see how long you are entitled to a courtesy car.
- If you own a classic car, consider taking an agreed value policy. These apply where the car is unlikely to devalue, because it is an antique or has collector’s value.
- Your final port of call is the Financial Ombudsman. This free complaints service will investigate and try to negotiate a suitable payment for you.
The best thing to do is to contact us as soon as you can. We deal with accident-damaged cars daily and can give you valuable advice on your options before your insurer announces their verdict. We will deal with the assessor/insurance company in your best interest and help you negotiate to keep your car and fix it, if this is the best option for you.