When you make a home insurance claim, the insurer normally offers to organise the repair themselves, or give you a cash settlement so you can arrange the repairs
Which? is urging households to carefully consider cash settlements offered by their home insurance providers over fears people could end up being left out of pocket.
When you make a home insurance claim, the insurer normally offers different solutions to get your property repaired. This could be that they organise the repair themselves, or give you a cash settlement so you can arrange the repairs.
But Which? has warned that in some cases, a cash payout can end up with households paying unexpected costs. For example if your house has been damaged and requires extensive repairs, you may not know the full cost until the work is underway.
Which? carried out a survey of 2,804 people who had made a claim on their home insurance in the last two years. Of those whose claims were either fully or partially accepted, four in ten (41%) were granted direct repair or replacement, roughly the same number were offered a cash settlement (38%), and one in five (19%) were offered a combination of these.
Sarah Richards from North Devon told Which? that the cash settlement she was granted by her insurer for repair work in her bathroom was “woefully low” and she ended up using her savings.
She claims that when loss adjusters visited, she was encouraged to sign paperwork to certify they had visited – not realising she was also agreeing to a cash settlement and the closure of her case.
In July, the FCA warned in its claims handling review that some firms may be offering cash settlements primarily to contain their own costs, without considering customers’ best interests.
The latest warning from Which? comes after the consumer watchdog launched a super-complaint to the financial regulator over how insurance companies treat their millions of customers.
Sam Richardson, Deputy Editor of Which? Money, said: “When you’re vulnerable, perhaps in the wake of a distressing event like a burglary or when dealing with the fallout from a fire or flood, it can be easy to accept the first offer your insurer makes – but it’s important to weigh if this will be in your longer term interests.
“This week, Which? has taken the extraordinary step of using its statutory powers to launch a super-complaint to the Financial Conduct Authority (FCA) over its concerns about the home and travel insurance markets.
“It’s time for the FCA to tackle poor behaviour in these markets once and for all, taking enforcement action where necessary to force action and act as a deterrent.
“This super-complaint should mark a turning point that leads to fundamental changes in how insurance companies treat their customers.”