A consumer group has warned that car insurance customers are being caught short at claims time by rapidly rising vehicle prices.

Those worst affected are insureds with agreed value policies that have not been reviewed since the covid-induced price increases, who have suffered a total loss.

Most motor insurers allow customers to choose between setting an agreed value for their vehicle, or selecting market value.

Agreed value has been preferred by many, as it provides certainty, with market value enabling the insurer to dictate a payout based on its assessment of a vehicle’s worth.

But with prices rocketing, and agreed value amounts usually dropping on renewal to account for depreciation, it has become a minefield for customers who don’t actively reassess sums insured on renewal.

Acting Senior Solicitor for Financial Rights Legal Centre Marianna Zaunders says a significant number of consumers have sought advice on the issue over the past two years.

“Policyholders are finding that they are underinsured and short-changed,” she tells insuranceNEWS.com.au.

Most car insurers pay cash, rather than having to find you a replacement car, although this can sometimes be added as a specific benefit.

While a consumer can dispute an insurer’s assessment of market value, it’s much harder to do that for agreed value.

If the value has been listed in renewal documents then the consumer has effectively approved it.

Ms Zaunders says there must be a “compelling reason” to dispute the policy terms as set out – and consumers therefore should read renewal documentation carefully.

“Look at what you are insured for and make sure it’s adequate,” she said.

The Australian Financial Complaints Authority (AFCA) has ruled on a number of agreed value disputes.

In one case, a man complained about a Suncorp settlement of $33,600 after his vehicle was written off, arguing that its value was between $55,000 and $60,000.

But AFCA sided with Suncorp, saying that it was an agreed value policy, and that an agreed value does not need to reflect the true value.

“To be clear, in proposing a figure for which it is prepared to cover the vehicle for the new policy year, the insurer is not giving personal advice or representing it reflects ‘market’ value,” AFCA said.

It also points out that the value was outlined in the renewal documents, which the complainant said he did not read.

In another case, also featuring Suncorp, the insured complained that a payment of $28,800 did not enable him to replace his written-off 2018 Isuzu DMax, for which he would have needed $44,000.

The complainant argued the insurer failed to properly inform him of the substantial increase in the market value of the vehicle. He adds that the insurer misled him and failed its duty of care by not informing him of the increased value of second hand vehicles.

But AFCA says Suncorp assessed the claim correctly, again pointing out that it was an agreed value policy and the insurer was not giving personal advice.

“The complainant has the responsibility to read the policy documents and ensure that the cover including the agreed value is suitable for his purposes,” the ruling says.

“He had the opportunity on renewal of the policy or at any time thereafter prior to the accident to seek the increase of the sum insured should he be concerned that the sum was inadequate.”