The great car insurance con: Complaints about payouts soar as motorists hit by record-high premiums

Exclusive: Insurers delaying payout claims and undervaluing cars among top complaints

Britons are unhappier than ever with their car insurance as complaints soar amid rocketing premiums.

Almost 12,000 complaints were received by the Financial Ombudsman Service (FOS) in the past year – a four-year high – making car insurance the third most complained-about financial product, behind current accounts and credit cards.

The number of car and motorcycle insurance disputes submitted to the watchdog has jumped by 27 per cent in a year, from 9,310 in 2021/22 to 11,851 in 2022/23, according to figures obtained by The Independent.

Payout delays and the undervaluing of vehicles were among the grievances raised.

The revelations follow this newspaper’s exposé into the great car insurance con, which found that car insurance premiums have been hiked by 48 per cent over the past year.

Millennials and older drivers have been hit hardest, with some drivers seeing their premiums almost double, despite there being no changes to their policy.

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Martyn James, a consumer rights expert, said motorists were facing a double whammy of soaring premiums and poor customer service. “Car owners are already having to deal with massive insurance increases at the height of the cost of living crisis. So, reports of terrible customer service, reluctance to pay out on claims and helplines that are anything but helpful are hitting people hard.”

The FOS provides a free mediation service between financial companies and customers: where a customer is unhappy with how a firm has handled their complaint, they can escalate it to the FOS.

The ombudsman said the spike in complaints was largely due to administration and customer service issues, and insurers delaying paying out on claims.

Number of complaints about car insurance rose 27 per cent in a year (PA)

It also had cases where customers complained that their car was worth more than the amount their insurer had given them, following a theft or an accident that wrote off the vehicle. The ombudsman said insurers did not always consider “all the available information, which tended to lead to offers that were less favourable”.

The FOS added: “We also saw complaints from consumers who felt it was unfair their claim for a vehicle theft by deception was rejected by their insurer.” Examples of deception include a thief pretending to be a potential buyer and switching the owner’s key with a similar one, then returning to steal the car.

The ombudsman upheld 30 per cent of the cases it received about car and motorcycle insurance in the customer’s favour, up from 28 per cent a year ago.

Complaints about car and motorcycle insurance have been steadily rising quarter on quarter, with 3,741 cases lodged with the ombudsman in the first three months of 2023. This compares to 2,623 a year ago, a 30 per cent increase.

According to Mr James, other common complaints with car insurance include partial payouts, misleading contracts, quality of repairs and disputes over when the damage occurred and whether it’s “wear or tear”. He commented: “I still hear quite a bit about people having their claims amended or dropped because they didn’t realise they had to disclose a previous incident that they chose not to claim for.”

Most complained-about car insurers

The FOS also revealed the most complained-about firms for car and motorbike insurance: Advantage Insurance Company (1,156 complaints in 2022/23), UK Insurance (907 complaints), Aviva (672), Esure (646) and AXA (639). Completing the top 10 are Admiral Insurance Company, Admiral (Gibraltar), West Bay Insurance, Skyfire Insurance Company and Ageas.

In recent years, Admiral has attracted the most complaints, but Advantage Insurance Company, a subsidiary of Hastings Group Holdings, now takes the dubious honour.

Steve Blears and Penny Haslam’s annual car insurance premium rose £550 to £1,046 – a blistering 90 per cent increase. (Getty/Supplied)

James Daley, founder of consumer group Fairer Finance, commented: “Hastings is a broker but has been placing more business with its own brand Advantage in recent years – and it would seem Advantage has not coped well with the growth. Ironically, Hastings has been running an advertising campaign over the last few years about how life is complicated – but Hastings car insurance is simple. Turns out that often isn’t the case.”

A spokesperson for Advantage Insurance Company said: “We take all expressions of dissatisfaction from our customers very seriously and work hard to put them right. We continuously review all complaints and make changes to processes to strive for the best possible service for our customers.”

UK Insurance is the second most complained-about insurer, according to FOS. It underwrites policies for the Direct Line Group, which also owns the Churchill, Privilege and Green Flag brands.

Mr James said: “It’s clear there’s a lot of dissatisfaction out there with certain firms, who would be well advised to up their game if they want to keep their customers.”

Mr Daley reflected that it had been a challenging time for motor insurers over the past year, “with Direct Line reporting massive losses in its book last year, which eventually led to the resignation of its CEO”.

He noted: “In that kind of environment, we’re inevitably going to see insurers fighting claims a little harder – which in turn pushes up complaint volumes and FOS referrals.”

According to consumer group Which?, the best car insurers for claims are RSA, Direct Line, LV and NFU Mutual, which all score highly for customer service and dealing with claims quickly.