Britain’s second-largest car insurer, Direct Line, has been directed to conduct a thorough review of claims from the past five years. The company admitted to underpaying customers who had their cars and vans written off. This ruling comes after an investigation by the Financial Conduct Authority (FCA), which began in December 2022. The FCA has ordered Direct Line to identify policyholders who received unfair settlements and provide them with appropriate compensation.
Direct Line has faced criticism from customers who claim that the company raised premiums by 50% to 75%. In response, Direct Line stated that it would review all total loss claims settled between September 1, 2017, and August 17, 2022. The company expects the impact to be minimal, with only a minority of customers affected. Direct Line reassured customers that they would be contacted directly to apologize and offer suitable compensation, including interest.
For Direct Line, this review represents another setback for one of the UK’s largest motor insurers. The company has already issued multiple profit warnings due to escalating claims costs, resulting in the departure of its CEO in January.
The FCA previously announced its discovery that motor insurance customers were receiving payouts lower than the fair market value for their written-off vehicles. Though the FCA did not name specific insurers, it emphasized that offering below-value settlements violates its rules, and it would take action against offending companies. Sheldon Mills, the FCA’s executive director for consumers and competition, condemned these practices, noting that they harm people when they can least afford it.
The recent FCA notice confirms suspicions that Direct Line has consistently offered below-value payouts for written-off cars. A Guardian Money report highlighted the case of Leslie Martin from Manchester, who criticized Direct Line for only offering him a meager £19,000 payout after his unique Rolls-Royce was written off. Martin ended up spending £32,000 on a replacement, valuing his car at more than £25,000. Direct Line defended its offer, claiming to have consulted various independent Rolls-Royce dealers.
Martin described the treatment of his claim as appalling and expressed no surprise that the company received regulatory scrutiny. Customers who believe their claims have been undervalued can file complaints with their insurers and escalate the matter to the Financial Ombudsman if necessary.
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