Financial Ombudsman Service and FCA move to modernise redress system
15 November 2024
We launch a ‘Call for Input’ jointly with the Financial Conduct Authority (FCA) to create stability for consumers and businesses.
Car modifications can wreck your insurance
From tinted windows to new alloy wheels, the pitfalls of vehicle alterations have been highlighted by us for the first time.
- We’re encouraging drivers to check their insurance policy small print or risk huge bills.
- We can help consumers if they feel unfairly treated by their insurer.
Modifying vehicles could leave drivers thousands of pounds out of pocket.
We are hearing from increasing numbers of vehicle owners who have been left to pay significant sums because they unknowingly invalidated their car insurance.
Car modifications can range from body kits and custom paintwork to performance enhancements such as upgraded exhaust systems or engine tuning.
Whether it’s changing alloy wheels for extra style or remapping the Electronic Control Unit (ECU) for better engine performance, not declaring these modifications can have serious consequences.
We see cases where a failure to declare these modifications leads to insurance being invalidated or claims being rejected in the event of an accident.
Often drivers are not aware that modifications – even seemingly minor alterations such as tinted windows or stereo system enhancements – can lead to higher premiums due to the increased risk associated with those vehicles.
Rachel Lam, Ombudsman Director of Insurance at the Financial Ombudsman Service, said:
For many people a car is their pride and joy, and it’s understandable that they may want to modify or personalise their vehicle.
But these changes can have huge repercussions – increasing premiums, invalidating insurance, or leaving unsuspecting car owners thousands of pounds worse off.
It’s crucial owners inform insurers of any modifications, even if they were made before the car was purchased.
If people don’t feel they have been treated fairly by their insurer, they can come to our service, and we will investigate their complaint. Getting a fair answer is free and easy.”
To help drivers navigate the pitfalls of car modifications, we’re offering tips to drivers based on cases that have been brought to the service. These include:
- Check your policy: Before making any modifications, review your insurance policy and contact your insurer to clarify what needs to be declared.
- Understand before you buy: If you buy a vehicle ask questions and examine paperwork to understand if it has previously been modified.
- Be honest and transparent: Always provide accurate information about any changes to your vehicle when applying or renewing your insurance.
- Seek advice: If you are unsure whether a modification could affect your insurance, it is always best to ask your insurer.
To help improve understanding of this issue, we have provided some case studies based on real examples:
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A consumer came to us when his insurer voided his motor insurance policy and refused to pay after his car was stolen.
He didn’t tell them about modifications made to the vehicle when he took out the policy, even though he was asked for this information – the modifications were only discovered when the insurer started looking into the claim.
Had they been told about the modifications earlier, they wouldn’t have sold him the policy. We agreed that the insurer was within its rights to void the policy and refuse all claims.
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A consumer came to us after his motor insurer voided his policy and declined his claim following an accident.
When the insurer looked at the claim, they discovered the car had alloy wheels fitted that were three inches larger that the manufacturer’s standard size. The consumer claimed he did not know the wheels had been modified.
We felt that an average consumer would not spot the difference in the new and standard tyres. For that reason, he believed the consumer took reasonable care when applying for motor insurance. As a result, the insurer was ordered to reinstate the policy and take several other steps to put things right, including compensating the consumer for distress and inconvenience.
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In another case, a consumer made a claim after an accident, only to have his policy voided when the insurer learned about an undeclared ECU remap and exhaust retuning. The consumer argued that these modifications were already in place when he purchased the car.
Despite this, the insurer produced evidence that he was aware of the modifications and had failed to disclose them. We agreed that the insurer’s decision to void the policy was fair and in line with legislation.
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A consumer came to us after his insurer voided his motor insurance policy and refused to pay his claim. They said he had changed the air filter of his car and considered that change to be a modification (and performance enhancing), which the consumer should have told them about.
After investigating the case, we didn’t think the consumer made any misrepresentation to insurer and didn’t think he should reasonably have considered that changing the air filter amounted to a modification for the purposes of the policy. We also felt that the replacement air filter had a negligible impact on the performance of the car – and on the likelihood of it being stolen or damaged.
The insurer was ordered to reinstate the policy, settle the claim, and pay compensation for the trouble and upset caused.
We have also seen cases where the owner has disclosed modifications, but at the point of claim, discovered that the value of the modification is not covered, despite paying more for the insurance. This backs up the importance of checking and reading all policy documents to understand what is covered by your insurer.
To check if something is classed as a modification, read policy documents carefully and contact the insurer if in doubt. You can also carry out an initial search online.
Find out more about how to bring a complaint.
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