Car written off - should insurer pay 'fair market value' or put you back in the position you were in?

[kp278]

Hi

 

We had an offer of £4184 for a written-off '14 plate Kia Ceed 1.6 CRDi 2, 90k miles, full main dealer history, good condition.

 

I understand the typical next step is to send examples of cars for sale, but after reading further I'm not sure.

 

An email from the insurer says

"The valuation placed on your vehicle will reflect the amount you could reasonably expect to sell your vehicle for on the open market"

but my understanding was always that one should be put back in the position they were in before the accident.

The latter seems it would provide for a higher payout.

I don't know if it would depend on fault.

 

Our insurer told us it was not our fault when we first made the claim but I don't know if that was just them being kind given they hadn't heard from the other party. We naturally think it was third party fault, they reversed towards us on the left side of the road and swung round catching the entire side of the car through the arc. Their opinion was we were too close.

 

The examples I have seen on autotrader are below.

I think some might be spec 3 or spec 1 so not exact equivalents so take this as a broad range.

 

4,190 - no service history
4,195 - much higher mileage, not main dealer history
4,200 - white....? not main dealer history
4,500 - not main dealer history
4,995 - higher mileage, not main dealer history
5,000 - lower mileage, main dealer history
5,700 - lower mileage, not main dealer history
5,990 - not main dealer history, low mileage

 

If it matters, we had tyres and major service done at end of November and a full tank of diesel. I assume this only matters if it was a non-fault claim?

 

Thanks for any guidance you can help with!

 

Kris

[kp278]

Insurer have sent us a cheque for the rejected amount as an interim payment, and say we only have the hire car until Friday. Where do we stand on that?

[unclebulgaria67]

Information link on vehicle valuations from the FOS

 

Vehicle valuations and write-offs (financial-ombudsman.org.uk)

 

Insurers claim settlement should be for what it would cost you to replace with a similar car, less any excess on the policy, less remaining Insurance premium if you pay monthly ( some Insurers do this).  

 

Insurers are entitled to withdraw the hire car, when there is an offer for the write off value.  They don't have to provide hire car or pay toward a hire car, while the settlement value is being argued about.

 

What you have to remember is that advertised prices are not what most people pay.  People will normally advertise  their cars for more and accept less.  As a guess, I would say 5% or more discount will normally be  negotiated.

 

So provide the Insurers with information and they may increase their offer, but not pay you the advertised prices of the examples you provide.

[kp278]

Excellent thanks for the information

[Ethel Street]

2 hours ago, kp278 said:

"The valuation placed on your vehicle will reflect the amount you could reasonably expect to sell your vehicle for on the open market"

but my understanding was always that one should be put back in the position they were in before the accident.

The correct measure is what it would cost you to buy the equivalent vehicle of same age and condition etc immediately before the accident.

 

However, surely the way the insurer has expresed it amounts to the same thing?  In effect  both prices amount to the price that a willing buyer and willing seller would have (hypothetically) agreed so whether you are buying or selling it's the same price. (The test imagines a private seller and private buyer and avoids the complkications of buying or selling through a garage.)

[Ethel Street]

2 hours ago, kp278 said:

If it matters, we had tyres and major service done at end of November and a full tank of diesel. I assume this only matters if it was a non-fault claim?

 

Missed that question.

 

Whether it was a fault or non-fault accident should make no difference to how a vehicle is valued . Its value is its value, whoever caused the accident.

Edited January 25, 2021 by Ethel Street

[kp278]

13 minutes ago, Ethel Street said:

The correct measure is what it would cost you to buy the equivalent vehicle of same age and condition etc immediately before the accident.

 

However, surely the way the insurer has expresed it amounts to the same thing?  In effect  both prices amount to the price that a willing buyer and willing seller would have (hypothetically) agreed so whether you are buying or selling it's the same price. (The test imagines a private seller and private buyer and avoids the complkications of buying or selling through a garage.)

I did wonder that as I was running it through my head. Fair market value sounds like it should be taken directly from the guide books. Being put back in a position we were before the accident sounds like you can take an average of what is currently available for sale.

[kp278]

This is what the insurer sent us with most of the filler removed:

 

Quote

 

Your vehicle is uneconomical to repair, we will be paying the Market Value of your vehicle, as outlined by your policy terms. Our valuation is explained below, along with the next steps of our process.

You must notify the DVLA that you are no longer the registered keeper of the vehicle. To do this, please complete Section9 of your V5C Vehicle Registration Certificate, with the name of the trader detailed below (their signature is not required) and send this to the DVLA, or you can use the link below:

www.gov.uk/written-off-vehicle

Please send the following items to our address below.

- V5C Vehicle Registration Certificate
- MOT Certificate if the vehicle is over 3 years old.
- All spare sets of keys, please remove any key rings.
- Any fascias and security codes of audio equipment.
- Please do NOT send any vehicle manuals.

Copart
Acrey Fields
Woburn Road
Bedford
MK43 9EJ

 

The valuation placed on your vehicle will reflect the amount you could reasonably expect to sell your vehicle for on the open market immediately before your accident or loss, we have placed a value of:

Valuation:	£4184
Net Settlement:	£4184

 

 

 

And my response:

 

Quote

 

Hi, many thanks for your second offer. We note it is almost identical to the first offer, and we respectfully reject the offer.

 

The reasons we reject the offer:

The amount offered does not return us to the position we were in before the accident.

The value of similar cars currently for sale range between approx. £4500-£6000, with one urgent sale at £4000.

The costs recently incurred in running our vehicle and keeping it in good condition amount to approx £450 (new tyre, service and MOT, a full tank of diesel). As we will not benefit from this expense we should be partially compensated for this expenditure.

Our vehicle was in very good condition, with a Full Kia Service History.

 

The amount we believe is a fair settlement figure:

£5136

 

Why we believe this figure is a fair settlement:

The cost to replace our car with an average of the similar cars currently available is £5144. We appreciate that cars do not sell for their asking price (although current Financial Ombudsman Service advice suggests cars are selling close to their asking price) and that 5% may be deducted, bringing the value to £4887. Add very reasonable compensation of £250 for recent expenses incurred brings the total to £5136.

 

Below are current examples for sale, dated 25.01.2021.  

 

We look forward to your response.

 

Many thanks, Kristian

 

 

 

[kp278]

We heard from the insurer, they say £4184 is their final offer and if we were unhappy we would need to go to the financial ombudsman.

 

I don't really get the whole undervalue thing. It's not like we're trying to make a profit out of it, we just want to replace the car with a similar car and £4184 doesn't do that.

[Ethel Street]

£4,184 is net of any policy excess by the look of it.  If you add back the policy excess from your own money would you have enough to buy an equivalent car (after doing some bargaining with the seller)?

 

It appears the insurer has considered your comments and are saying this is their final offer, take it or leave it. Is that what you understand?

[kp278]

12 minutes ago, Ethel Street said:

£4,184 is net of any policy excess by the look of it.  If you add back the policy excess from your own money would you have enough to buy an equivalent car (after doing some bargaining with the seller)?

 

It appears the insurer has considered your comments and are saying this is their final offer, take it or leave it. Is that what you understand?

 

The policy excess is £250, but when we spoke to them to raise the claim they said something about waiving the excess, and again when we received the first offer it was:

 

value = £4,100

minus policy excess = £0

final settlement = £4,100

 

Either or, £4184 or £4434 would not be enough to buy an equivalent car. Based on the average value of 7 similar cars current available, a similar car would cost £5000. Assume 5% bartering, £4750.

 

Yes this is their final offer. I had a look at their website complaints page just now and their final offer closes step 1 of the complaint. Step 2 on their complaints page would be to write their customer relations exec (they neglected to mention that on the call). Step 3 is the FOS.

 

 

 

 

Edited January 28, 2021 by kp278

[kp278]

They called to speak to my partner, aside from being rude, curt and a bit of a (insert bad word here) they said £4184 was the higher of the three book prices.

[kp278]

I read the below on the FOS site, it appears to suggest the insurers are right to use the trade guides. The only out I can see in the information below is whether the autotrader adverts are enough to prove the trade guides are wrong? The FOS certainly don't appear to support the idea that one must be put back in the position they were in before the accident.

 

https://www.financial-ombudsman.org.uk/businesses/complaints-deal/insurance/motor-insurance/vehicle-valuations-write-offs

 

Quote

 

Where the customer says the vehicle valuation is unfair

• To decide whether a valuation is fair, we compare it with prices in online motor trade guides such as Parkers, Glass, CAP and Cazana.

  We’re likely to agree with your valuation if the amount is in line with the guides. But if we think your valuation is unfair, we’ll tell you to adjust it using the guide prices.

  If a guide price is significantly higher or lower than the others, we may think it’s reasonable to ignore it. This depends on the value of the vehicle. For example, a difference of £200 would be significant for a £1,000 car, but not for a car worth £9,000.

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  Customers sometimes say the amount they’ve been paid is unfair because they’ve seen similar vehicles advertised at higher prices.

  We wouldn’t normally place much weight on adverts to decide whether a valuation is fair. Differences in mileage or year of registration can significantly affect value, and in sometimes the vehicle actually ends up selling for a lower price than advertised.

  Although, you should be aware that more recently, we’ve been told by some trade guides that generally cars are selling at or close to advertised prices.

  Adverts may be helpful if the complaint involves a classic or rare model. Or if they strongly indicate that the guides could be wrong.

 

•  

Edited January 28, 2021 by kp278

[kp278]

We received a final offer letter so have complained to the FOS

[kp278]

Denied. Here's the full response from FOS:

 

Dear Mr x

Miss x complaint about  esure Insurance Limited  trading as Sheilas' Wheels

 

Thank you for your patience while I’ve been looking into the complaint. I now have enough information to provide an answer.

 

As the complaint relates to a claim the case has been set up against the underwriter, esure Insurance Limited (esure). So, to avoid confusion I’ve referred to them throughout this correspondence.

 

About the complaint

 

Miss x is unhappy with the settlement esure has offered to pay for her vehicle, after it was deemed a total loss.

 

Background

 

In January 2021, Miss x vehicle was involved in an accident which resulted in significant damage to the vehicle. Following this, contact was made with her motor insurance provider, esure, to notify them about what had happened and start the claims process.

 

esure looked into the claim and deemed the vehicle a total loss, they then calculated a value for her vehicle and offered her a settlement.

 

Miss x wasn’t happy with esure’s offer, as she felt the vehicle was worth more, so she registered a formal complaint. To support her complaint, she sent esure examples of similar vehicles currently for sale listed higher than what esure were prepared to pay for her claim.

 

esure reviewed the complaint and provided Miss x with their final response on 29 January 2021, which said:

 

‘When we look at valuation disputes we follow the same process as the Financial Ombudsman Service. We compare the selling price of similar vehicles in specialist on-line motor trade guides called Parkers (if the complaint is close to the date of the loss or damage), Glass’s, CAP and Cazana. These represent selling prices rather than advertised prices. The link below will take you to their guidelines:

 

http://www.financial-ombudsman.org.uk/publications/technical_notes/motor-valuation.html 

 

The guides are used to establish the current market value. The retail values shown for your car are as follows:

 

Glass’s – £4750

Parkers – £3855

CAP – £3886

Cazana – £4244

 

This indicates that a fair value for your car would be between £3855 and £4750.’

 

esure explained they took an average of the four guides to reach a final value of £4,184 for the vehicle. Based on this information, they felt their valuation was fair.

 

Miss x remained unsatisfied with this response, as she said the amount esure offered wouldn’t be enough to cover a replacement vehicle. She calculated a fair value to be approximately £5,000 based on similar vehicles currently for sale online.

 

She also spoke to a couple of dealerships who explained the current market is saturated with buyers who don’t want to use public transport due to the risk associated with Covid19 and this has pushed up demand and reduced availability. She believes this explains why the book price reached by esure has undervalued her vehicle.

 

Considering this, Miss x brought her complaint to our service for an independent review.

 

Findings

 

I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, unfortunately, we’re unable to ask esure to do any more. I appreciate this will come as a disappointment to Miss x, so I’ll explain the reasons why.

 

Within the policy booklet, under the heading ‘Damage to your car– Section 2’ it says:

 

‘What is covered

 

All loss and damage to your car unless it’s by fire, lightening, explosion, theft or attempted theft. We will:

 

• pay to repair the damage or
• replace what’s been lost or damaged if it’s more cost effective than repairing it; or
• pay to settle your claim.

 

Things you need to know

 

• We’ll decide which method we use to settle your claim.
• We won’t pay more than the market value of your car at the time of loss, less the total excess payable.’

 

And market value is defined as:

 

‘market value - The market value is the amount you could reasonably have expected to sell your car for on the open market immediately before your accident or loss. Our assessment of the value is based on cars of the same make and model and of a similar age, condition and mileage at the time of accident or loss. This value is based on research from motor trade guides including: Glass’s, Parkers and CAP. This may not be the price you paid when you purchased the car.’

 

Therefore, esure has acted in accordance with their terms and conditions by basing their valuations on research from the motor trade guides. These terms were agreed upon when Miss x entered into a contract with esure and unfortunately, I can’t say the terms aren’t clear.

 

Additionally, at the Financial Ombudsman Service, we are set guidelines which mean we use a similar approach. We input the details of a vehicle into the online guides: Glass’s, CAP, Cazana and Parkers and use them to determine a fair valuation of the vehicle.

 

This is a set approach which has been confirmed by the regulator, the Financial Conduct Authority (FCA). And we must keep this approach consistent in fairness to other businesses and consumers who experience similar circumstances.

 

If we’re provided with other evidence of a vehicle’s valuation, such as the opinion of another expert engineer, then we also take this into account when assessing if a business has acted fairly.

 

I’ve checked the motor trade guides myself, and the values I can see for Miss x vehicle were:

 

• Glass’s: £4,750
• CAP: £4,100
• Cazana: £4,260
• Parkers: £3,855

 

Looking at the values above I can see the average calculation reached by esure of £4,184 is within the motor guide range we would say is fair.

 

Miss x wasn’t happy with the guides, as she found several vehicles advertised on Auto Trader where the price was listed higher than what esure had offered. I understand these adverts were based on vehicles of a similar make, model and age to what Miss x had, so she felt the settlement should’ve been higher in order to replace her vehicle for something equivalent.

 

This evidence has been considered and unfortunately, it’s not enough to say esure have valued the vehicle unfairly.

 

Advertisements are often negotiable and reflect the seller’s highest expectation. So, we don’t consider advertisements to be as accurate as the online motor trade guides we use, unless the vehicle is a classic or unique model. This is because if a vehicle is rare the guides may not hold enough information about it to conclude a reasonable valuation. But as the vehicle isn’t a classic or rare model, I can see the guides have a large amount of data to base their valuations on. So, in this case we think the guides are fair.

 

Conclusion

 

For the reasons I’ve explained, unfortunately I’m unable to say the value of £4,184 esure has offered to pay for Miss x vehicle isn’t fair and reasonable.

 

This offer is in line with what the Financial Ombudsman Service feel is fair for such cases as this. And we would’ve recommended a similar offer had they not already provided this to her.

 

So, while I understand how difficult this matter has been for Miss x and completely appreciate the disappointment she may have, unfortunately we can’t ask esure to increase their offer any further.

 

I’m sorry this wasn’t the outcome she was hoping for, and after going through the case in detail and speaking with you over the phone, it’s with regret that we’re unable to uphold the complaint.

 

Next steps I think this is a fair outcome in the circumstances, for the reasons I’ve explained. But if Miss x decides that she doesn't accept what I’ve said, then please let me know by 20 April 2021. If I can’t resolve things then an ombudsman here can look at everything again and make a final decision. If I don’t hear from you by that date we might not be able to look at Miss x complaint again.

[Manxman in exile]

You have a deadline of 20 April if you do not agree with that decision and want an actual* ombudsman to look at it.

 

Are you taking it further?

 

*I'm not certain of the precise terminology but as I understand it what you quote in #15 is not the ombudsman's "decision" as such, but simply some sort of preliminary finding following a FOS investigator looking into the complaint.

 

 

[kp278]

Hi, I think we are leaning towards waiting for 3rd party to admit liability and then pursuing 3rd party insurer/3rd party employer for the difference.

 

I think there is no harm in responding to the ombudsman email, I need to construct an email, but there is nothing extra I can add that I haven't already said. I'm also not sure if an actual ombudsman decision would go against us in court (if it got that far) versus an investigators decision, I don't want to jeopardise my position.

[kp278]

We sent this to the ombudsman citing their own guidance for business -

 

I can state that following discussion with Miss X we do not agree with the outcome.

 

The FoS guide for business contains the below and we would like this considered in relation to our complaint, specifically the sections 'we've been told by some trade guides that generally cars are selling at or close to advertised prices' and 'Adverts may be helpful... if they strongly indicate that the guides could be wrong'.

 

https://www.financial-ombudsman.org.uk/businesses/complaints-deal/insurance/motor-insurance/vehicle-valuations-write-offs  

 

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Customers sometimes say the amount they’ve been paid is unfair because they’ve seen similar vehicles advertised at higher prices.

 

We wouldn’t normally place much weight on adverts to decide whether a valuation is fair. Differences in mileage or year of registration can significantly affect value, and in sometimes the vehicle actually ends up selling for a lower price than advertised.

 

Although, you should be aware that more recently, we’ve been told by some trade guides that generally cars are selling at or close to advertised prices.

 

Adverts may be helpful if the complaint involves a classic or rare model. Or if they strongly indicate that the guides could be wrong. 

 

We are informed by persons within the motor trade that the impact of the pandemic on the industry has resulted in an increase in demand in the second-hand car market and has meant cars are indeed selling for close to advertised prices. I would therefore argue the trade guides are not aligned with the current and fast changing economic situation and are not a reliable source to gauge fair market value. Further, E-sure failed to consider evidence from advertisements despite our request and your clear advice to do so.

[kp278]

Denied

 

Many thanks for your email dated 19 April 2021, in reply to the assessment. And I’m sorry to read that you’re not fully satisfied with the outcome.

Having received your further comments, I arranged for your case to be looked into again, so I’d like to give you the findings on the points you’ve raised.

Your further comments

After speaking with Miss X, you informed us you didn’t agree with the outcome, you referred to our website where we have a guide for businesses which you wanted to be considered in relation to your complaint. Specifically, the sections ‘we’ve been told by some trade guides that generally cars are selling at or close to advertised prices’ and 'Adverts may be helpful... if they strongly indicate that the guides could be wrong'.

You quoted the extract from our website, which said:

'Advertisements

Customers sometimes say the amount they’ve been paid is unfair because they’ve seen similar vehicles advertised at higher prices.

We wouldn’t normally place much weight on adverts to decide whether a valuation is fair. Differences in mileage or year of registration can significantly affect value, and in
sometimes the vehicle actually ends up selling for a lower price than advertised.

Although, you should be aware that more recently, we’ve been told by some trade guides that generally cars are selling at or close to advertised prices.

Adverts may be helpful if the complaint involves a classic or rare model. Or if they strongly indicate that the guides could be wrong.'

You explained you were informed by persons within the motor trade that the impact of the pandemic on the industry has resulted in an increase in demand, especially in the send-hand market and has meant cars are indeed selling for close to advertised prices.

Because of this, you said you’d argue the trade guides are not aligned with the current and fast changing economic situation and are not a reliable source to gauge fair market value. Further to this, you told us esure failed to consider evidence from advertisements, despite your request and our advice to do so.

Findings

Regarding your point about the guides potentially not being as accurate, due to the current circumstances around the pandemic meaning second-hand cars are now in higher demand than pre Covid-19, and therefore selling for more than they were in other years. As our website explains, some trade guides advised us that generally cars are selling at or close to advertised prices, however this doesn’t mean the results from the guides should be discounted.

The guides run off live sales from all over the country, using many different selling platforms and markets. They monitor around 1.5 million transactions per year and use this research to study daily contact with sellers and buyers of vehicles in the UK. These transactions are checked, processed and then validated before the valuations are issued online.

The guides we use run off live sales, so we know they hold enough current data to be able to produce a fair result for Miss X’ vehicle at the time of loss, even in the present circumstances.

Its clear there is a large amount of data for a 2014 Kia Ceed 2 EcoDynamics 1.6CRDi for January 2021, and we know this because had there not been a significant amount of current data available the guides wouldn’t have produced a result.

Therefore, as the guides use up to date information to base their valuations on, we’re satisfied the valuations aren’t negatively affected by any lower or inconsistent results from previous years or from sales before the pandemic.

Looking at the extract quoted from our website, it says adverts may be helpful if the complaint involves a classic or rare model. Or if they strongly indicate that the guides could be wrong.

In this case, we know the guides hold a large amount of up to date information for sales of vehicles similar to Miss X’ at the time of the loss, so we can’t say the adverts strongly indicate the guides could be wrong.

Additionally, when we say classic or rare, we mean extremely rare, for example something that is more than 50 years old or made as part of a limited addition group. This is because the guides hold little information about vehicles like this, or of a certain age. Unfortunately, we can’t say Miss X’ vehicle fits into this category as the guides hold a lot of data for a Kia Ceed 2 EcoDynamics 1.6CRDi of that age, mileage and condition. Because of this, we must follow the guides as we are instructed to do by the regulator, which is why I’m afraid we’re unable hold more weight to the advertisements you’ve found online.

I’m really sorry this wasn’t the outcome you wanted, as I understand you both feel strongly that the settlement wasn’t enough, but I hope after escalating the case for a second review, we’ve been able to explain why, regrettably, we can’t ask esure to increase their offer any further.

[kp278]

I fired this back. I deleted the word fraudulent so I didn't get into trouble, but I do wonder if the guides are just that. We've looked every week for 12 weeks so see if prices are dropping and they are not. The guides are just not aligned with reality. I wonder on the process of 'transaction verification' and whether something's at play to keep the book prices artificially low. Lower book prices benefit the insurance company, they benefit traders, to the detriment of joe public. Perhaps that is unfair, do put me in my place if it's out of order.

 

Hi

 

Could I ask - do the guides include part-ex/ trade-in prices that are not available to the general public?

 

It is simply not possible to buy a Kia Ceed 1.6CRDi 2 for c.£4,184. Even right this very moment on Autotrader (the largest digital marketplace in the UK) the cheapest available vehicle is £4,750. That is largely the picture I have seen over the past 12 weeks since we first raised a case with the Ombudsman. When you consider that £4,184 was not the lowest settlement figure but an average, it's apparent that the regulations reliance on these guides makes a mockery of the 'fair and impartial' position of the Ombudsman. There is nothing 'fair' with Esure's suggestion that we should be able to replace the aforementioned vehicle for £4,184 when 3 months of searching suggests this is not only difficult but actually impossible. There is nothing 'impartial' about the reliance on the 'guides running off live sales' when a simple look at the open market suggests the guides are just not aligned with reality.

 

Regards

[unclebulgaria67]

Nothing stopping you looking to take the Insurers to Court, if you can evidence they have not honoured the contract terms. by providing evidence of actual replacement cost. The Insurers may decide not to spend money defending any claim. 

 

The FOS have obviously decided to back the Insurers using the book guides to decide value, due to Covid-19 affecting sale volumes. 

 

 

[kp278]

Good to know. We're sitting idle at the moment, waiting for fault to be apportioned to the 3rd party before deciding if we pursue said third parties employer/insurance company or our own insurance company.

 

Miss X had an update today, to say the 3rd party was disputing the claim on the basis that Miss X was impatient. They are awaiting dashcam/cctv footage from the 3rd party. I'm fairly sure impatience is relative/objective. I never did explain what happened....

 

Miss X driving along a straight road in an industrial estate. A van a short way in front pulled over to the right hand side and stopped at the kerb, then reversed into a forecourt on the right. As the front of the van swung round it caught the side of Miss X car. 

 

 

[kp278]

Mrs X had a call, "the dashcam footage doesn't support her claim so the insurer will not be held liable". I'm flabbergasted, how can Mrs X hit someone with the side of her car. What do we do now..... solicitor?