Which? reveals how accepting a cash settlement from your home insurer could leave you out of pocket
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Which? is warning consumers to carefully weigh up cash settlements
offered by their insurers, amid concerns some firms may be offering
cash to curtail their own costs, rather than pursuing the option
that is in the best interests of their customers. There are three
main ways an insurance claim can be resolved successfully. The
insurer could take it upon itself to repair or replace your losses,
it could offer a cash settlement, or pursue a combination of the
two. When...Request free trial
Which? is warning consumers to carefully weigh up cash
settlements offered by their insurers, amid concerns some firms
may be offering cash to curtail their own costs, rather than
pursuing the option that is in the best interests of their
customers. When 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*. While accepting a cash payout can seem like a quick, clean way to resolve what could otherwise be a lengthy claim process, in some cases claimants can risk being left out of pocket in the long run. For example if your house has been damaged and requires extensive repairs, you may not know the full cost of restoring it until the work is well underway – and therefore whether the insurer's settlement offer was adequate. Sarah Richards from North Devon told Which? that the cash settlement she was granted by her insurer for repair work after an escape of water in her home was “woefully low”. Discussing her experience, she said 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. “It was a terrible experience, I was made to feel like a criminal for making a claim,” she told Which?. She was horrified that she was left relying on her savings to put right the extensive damage to her bedroom - and said she was worried how many others may have been left in similar circumstances. 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 regulator also highlighted ‘legal risks' where cash settlements reflect discounted rates from an insurer's suppliers and contractors that would not be available to customers. Which? is concerned that this, combined with rapidly rising costs for many trades, means consumers may be likely to underestimate the full cost of repair work. Over the past year, Which? has campaigned to End the Insurance Rip-Off and has produced a series of research reports exposing poor customer experiences - from widespread consumer confusion over what is covered by a policy, to frustrating and substandard treatment when people need to make a claim. Given the scale of harm faced by consumers, Which? believes the regulator's response to its 2025 claims-handling review, and a series of previous regulatory reviews, has been insufficient.
Which? has therefore taken the extraordinary step this week of
using its statutory powers to launch a super-complaint to the
financial regulator, calling for a fundamental reset in how
insurance companies treat their millions of customers.
“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. "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.” -ENDS- Notes to editors
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