UK Car Insurance - What Happens When An Insurance Company Decides To Write Off A Vehicle

A vehicle is written off when the estimated repair cost is higher than the present market value of a similar vehicle. Once the insurer decides that the vehicle is a write off then they begin the process described here.

1) The vehicle will have been moved from the repairers to a salvage yard. This is done to save storage costs imposed by repairers for vehicles in their compounds.

2) The insurance company will ask you for the vehicle documents. That is the V5 registration document, purchase receipts, keys, MOT certificate if your car requires one, service records and details of any outstanding finance. They will ask that you return your certificate of insurance. They will require the original paperwork before they will be able to settle your claim. Photocopies to start with will suffice but will slow down the process.

If you ask them why they require all of this paperwork, they will likely tell you that they need to check that they have the correct model of the car, that it had a valid MOT certificate and proof of service record to establish that is has been maintained. These are all valid reasons. But they also need to validate your claim for fraud. Official documents have several anti-fraud measures designed by the issuing Government department. A careful check on the originals will help the claims official to establish quickly that these are indeed genuine documents and not fake. If there is doubt, they will use forensic science equipment to prove that the documents are genuine or fake. You would have to be a very shrewd villain to successfully forge all these documents. My advice is - let your insurers have the original paperwork as soon as they request them. Your claim will be delayed if you send copies.

3) Whilst you are awaiting your settlement proposals, your insurers will be setting other wheels in motion as well. They will record the claim on the 'motor insurance anti fraud and theft register'. (MIAFTR) This is a UK data base that has been recording all insurance written off vehicles and stolen cars since the start of the 1980's. It checks your car against the contents of the database to see if the car has ever been the subject of an insurance total loss before, or whether it has been previously stolen and never recovered. It checks against your name and address; post code; your vehicle's registration number and VIN (vehicle identification number). If there is a match further questions will be asked of you, and your insurance company might begin 'fraud investigation' mode.

MIAFTR also automatically checks your car against the HPI (Hire Purchase Information) database. If you took out finance to buy the vehicle and you still have an outstanding balance, it will be on the HPI database. Rest assured that your insurer will discover it. So be honest and tell them about your finance. The loan company is the legal owner of your car. Any settlement must be made to them until the loan is paid off. Whatever is left is paid to you. Similarly, your claim will be recorded on CUE (Claims and Underwriting Exchange). This happens automatically on all vehicle and house insurance claims. Not all insurance companies subscribe but most of them do.

Problems can arise where the outstanding balance of the loan exceeds the value of the vehicle. In this case the insurance company does not completely pay off the loan. I remember a scheme for motorcycles. Young people went into a dealer, bought a new motorcycle plus all the leathers, helmets etc with money borrowed against the value of the bike. The interest rate on the loan was very very high. Some time later they would have an accident and they would total loss it (or it was stolen). The value of the motor cycle was much less than the total purchase price plus the interest. It caused a furor which was blamed on the insurer and not the stupidity of the motorcyclist for getting involved in such a bad deal with the shop.

4) Your insurer will be obtaining bids for the salvage. The more they can get, the less they will have to pay out on your claim. There has been much publicity about cars which have been written off finding their way back on to the road, or being purchased by the criminal fraternity to aid their disguise of a stolen vehicle. The Association of British Insurers (ABI) have issued a code concerning the disposal of vehicle salvage. All insurance companies adhere to these rules. The result is that the majority of salvage is sold by the companies to established salvage merchants. If the vehicle is damaged to an extent that meets listed criteria, it will be stamped with a code that makes it illegal to repair the car and return it to the road. Vehicles with less damage can still be repaired and put back on the highway.

5) Once all of the above processes have taken place your insurers will make a settlement proposal to you.

Their assessor will have referenced the trade publications to value the vehicle, adjusting these figures for the age, condition and mileage of your car, and his knowledge of the current car market. The final figure he comes up with forms the basis of the settlement figure given to you. An excess might have to be deducted along with any outstanding finance.

Your insurer will make it very clear exactly how much you will get and explain any adjustments to you. If you pay your motor insurance by Direct Debit, the chances are that any remaining premium will also be deducted from the settlement cheque.

6) When you have accepted the value (some companies might require your signature to a document called a 'form of discharge') you will be sent a cheque.

7) Your insurers then own the remains of your car and, subject to legislation and the ABI codes, can do what they want with it. This will undoubtedly mean they will sell the salvage.

By: Terry Cod