Which? is warning homeowners to think twice about cash settlements from their home insurance companies amid fears people could be left seriously out of pocket
Which? is urging homeowners to reconsider cash settlements from their home insurance providers amid fears people could end up significantly out of pocket. When submitting a home insurance claim, insurers usually offer several options to restore your property.
They may organise the repairs directly, or offer a cash settlement allowing you to arrange the work yourself. However, Which? has warned that cash payouts can sometimes leave households facing unexpected costs.
For example, if your home sustains damage requiring extensive repairs, you might not uncover the real cost until building work commences, reports the Mirror. Which? polled 2,804 people who had made home insurance claims within the previous two years.
Amongst those whose claims were fully or partially approved, four in ten (41%) received direct repair or replacement, roughly the same number got cash settlements (38%), whilst one in five (19%) were offered a combination of both options. Sarah Richards from North Devon told Which? that the cash settlement her insurer offered for bathroom repair work was “woefully low” and she eventually had to use her own savings.
She claims that during the loss adjusters’ visit, she was convinced to sign paperwork confirming their attendance – without realising she was also accepting a cash settlement and the closure of her claim. In July, the FCA issued a warning in its claims handling review that some firms might be prioritising cash settlements to manage their own costs, without considering the best interests of their customers.
This latest alert from Which comes after the consumer watchdog launched a super-complaint to the financial regulator about how insurance companies treat their millions of customers. Sam Richardson, Deputy Editor of Which? Money stated: “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 long-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.”
