Here is the text of a letter we picked up on in the Saturday Telegraph Money ‘Ask the Expert’ section. We’ll give it to you as it appeared in the paper.
WE GOT stuck in our car in floods and the engine was ruined. An independent engineer appointed by the insurer, Lloyds TSB car insurance, inspected the car at the garage and agreed that a new engine was required. The old one had done 80,000 or so miles.
My claim was accepted and the insurer confirmed that, subject to my payment of the £250 excess, it would setle the balance on receipt.
After the car had been repaired, I received a phone call from the engineer saying Lloyds TSB was applying a ‘betterment charge’. This turned out to be £1,968 including value added tax (VAT). We needed the car and there was no time for debate. So we paid the garage.
A ‘BETTERMENT charge’ reflects the uplift in the value of the car, compared with what it was worth before the incident that led to the claim. The purpose of insurance is to return the insured to the position they were in originally, rather than making them better-off.
The charge you refer to reflected the added value of having a brand new engine rather than the old one that had significant mileage on the clock.
However, you could have had a cash settlement in line with valuie of the destroyed engine but Lloyds TSB Insurance had not told you this was an option.
After the betterment charge was applied, you offered £400 towards it. You felt that, having confirmed that the insurer would settle the balance of the repair, it should not have hanged its mind.
There is considerable force in that argument but the insurer did not accept your offer. Now, however, a full refund of the £1,968 has been sent to you.