Upheld: poor claims handling, failure to investigate, premature settlement, inadequate due diligence complaint against Society of Lloyd's (underwriters)
Financial Ombudsman decision DRN-5828465 of 2026-04-17T00:00:00+00:00. poor claims handling, failure to investigate, premature settlement, inadequate due diligence complaint against Society of Lloyd's (underwriters). Outcome: Upheld.
Decision detail
| Reference | DRN-5828465 |
|---|---|
| Decision date | 2026-04-17T00:00:00+00:00 |
| Firm | Society of Lloyd's (underwriters) |
| Product | Motor insurance |
| Claim type | poor claims handling, failure to investigate, premature settlement, inadequate due diligence |
| Outcome | Upheld |
| Remedy | 1. Record the incident as having involved no outlay and review premiums charged since the loss date, refunding any additional premium charged as a result of the claim being settled as it was. 2. Pay C £150 compensation for inconvenience caused. |
Summary
C, a limited company, complained about how Lloyd's underwriters handled a third-party claim arising from a low-speed collision involving C's van. The third party claimed the collision was at 20mph and submitted claims for over £7,000 in repairs, £2,765 in hire costs, and injury claims totalling £1,518, despite C's account indicating the collision was approximately 2mph with minimal visible damage. The underwriters settled all claims without investigating the repair costs (based on a desktop estimate) or obtaining medical evidence to support the injury claims, despite internal notes documenting concerns about exaggeration. This resulted in C's insurance premium increasing by 50% at renewal. The ombudsman upheld the complaint, finding the underwriters failed to exercise due care and diligence, and ordered the claim be recorded as having no outlay with premium review and £150 compensation.
The Ombudsman's reasoning
While insurers have discretion in settling claims, this discretion must be exercised fairly and reasonably with due care and diligence. The underwriters failed this obligation by: (1) paying repair costs of over £7,000 based solely on a desktop estimate showing minimal visible damage without any investigation or queries; (2) claiming hire costs justified the settlement when repairs were already completed; (3) documenting internal concerns about claim exaggeration but then offering tariff injury payments without requesting supporting medical evidence; (4) settling prematurely without testing the inconsistencies in the third party's account. The ombudsman found it likely the underwriters could have resisted the entire claim had they properly investigated, and that settling the damage claim did not logically necessitate settling the injury claim.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Society of Lloyd's (underwriters), all decisions | 1 | 100% |
| Motor insurance, all decisions | 23,874 | 35% |
Source
Read the original decision on the Financial Ombudsman Service website