Direct Line to reassess claims after regulator discovers underpayments
Direct Line has been ordered to go back through five years of claims after admitting it had underpaid some car and van insurance customers.
The Financial Conduct Authority issued a notice on Wednesday saying the FTSE 250 insurer “must carry out” a review of total losses where vehicles had been written off, “to identify any policyholders who received unfair settlements and provide them with appropriate redress”.
Direct Line said in a notice on its website that it was working to identify “everyone affected” by underpayments on written-off cars between the start of September 2017 and mid-August 2022.
“Customers don’t need to contact us, either directly or via third parties,” the company said. “We’ll contact affected customers directly to put things right.” In a further statement the insurer said “the vast majority of customers will not be impacted”.
The review is the latest blow to one of the UK’s biggest motor insurers and follows a string of profit warnings caused by spiralling inflation in its claims costs, which prompted the departure of its chief executive in January.
The FCA said in December it had seen evidence that motor insurance customers whose cars had been written off in a crash had received payouts lower than fair market value, but did not name insurers.
“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,” Sheldon Mills, the FCA’s executive director for consumers and competition, said at the time, adding that such practices would hit people “precisely at the time they can ill-afford it”.
UK insurers have come under pressure in recent months over their treatment of customers.
Admiral this week announced it was enhancing its home insurance policy to cover the cost of accommodation for any customer who is required to evacuate their home by a local authority of the emergency services.
At a Treasury committee appearance this month, insurance executives including Admiral’s head of UK, Cristina Nestares, had come under pressure to provide such emergency relief.
Labour MP Siobhain McDonagh raised the matter of a gas explosion in her constituency where hundreds of residents were required to leave their homes, saying it was the local authority that had to spend more than £2mn on temporary accommodation.
“Is it not part of your industry to have an emergency service and an emergency offer to people?” she asked executives.
This story originally appeared on: Financial Times - Author:Ian Smith