DRN-6253415

The complaint Mr R complains about the amount Tradex Insurance Company PLC paid him to settle his claim on his motor insurance policy after deeming his car a total loss. Reference to Tradex includes its agents. What happened Mr R held a motor insurance policy with Tradex. After being involved in an accident he called his broker to make a claim. His claim was initially dealt with by an accident management company (AMC) who assisted Mr R in claiming directly from the insurer of the other driver involved (TPI). Mr R’s car was deemed a total loss and via the AMC, he was offered a settlement amount by the TPI, which included a salvage charge of £3,420.40 to allow him to keep the car. This settlement was never paid though, because liability for the incident was disputed, so Mr R’s claim was passed to his own insurer, Tradex. Tradex also deemed the car to be a total loss, a category N. It offered Mr R the same value for his vehicle as the TPI had. But it said if he wanted to keep it, it would charge him £7,695.90. Mr R didn’t think this was fair – he thought Tradex should offer the same as he was offered by the TPI. Tradex didn’t change its stance, so Mr R brought his complaint to the Financial Ombudsman Service. Our Investigator recommended it be upheld. She said she couldn’t make Tradex honour the settlement offered by the TPI, nor could she look into any of the AMC’s actions, or the broker’s actions in this complaint. But she didn’t think Tradex had evidenced why its salvage deduction – which equated to 45% of the car’s market value was fair. She said Tradex should instead deduct a lower amount typical of that deducted by other insurers. In response, Tradex sent information it said evidenced why its deduction was fair. That information showed that if the policyholder wanted to keep the vehicle (with the same category total loss as Mr R’s and within the same value range) the salvage fee was 45%. But that same table showed that if the policyholder didn’t keep the car, the salvage fee was significant less than that – lower even than the amount our Investigator recommended in her assessment. Our Investigator asked Tradex why there was a different figure if the policyholder kept the vehicle, but unsatisfied with its response, she recommended it only deduct the lower figure (equivalent to what it would have received had Mr R not kept it) for salvage and pay Mr R the difference between that and what it had already deducted. Because an agreement wasn’t reached (although Mr R accepted her findings) the case has now come to me to issue a final decision on.

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What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I’m upholding it and will require Tradex to only charge the lower amount for salvage as detailed in the table it sent us. I’m purposefully not putting that figure in this decision as it could be considered commercially sensitive, but Tradex, Mr R and we know what that figure is. Ultimately the dispute here centres around the deduction made for Mr R keeping his vehicle after it being deemed a total loss – that deduction is known as a salvage deduction, with the written off vehicle being the salvage. As a general principle we think it’s fair that insurers make a salvage deduction when the policyholder (or if different, the owner of the vehicle) wants to keep their vehicle after it’s been deemed a total loss (assuming it is safe for that to happen). That’s because once a vehicle is deemed a total loss and the settlement is paid, under normal circumstances, the vehicle becomes the property of the insurer – and most policies will contain wording in the policy to this effect. What usually then happens is the insurer passes that salvage (the written off vehicle) to its salvage agent in return for a fee (although sometimes the salvage agent is the same company that recovers and stores the vehicle so may already have the vehicle in its possession). That salvage agent usually then sells the vehicle at auction. So, where a policyholder elects to keep their vehicle, and it is able to be safely returned to them (salvage category dependant), the insurer no longer receives that fee from its salvage agent and therefore suffers a loss. It’s therefore fair and reasonable for the insurer to pass that loss on to the policyholder. At the same time, passing this loss on prevents betterment. It’s not fair for the policyholder to get paid the full market value of the vehicle and keep the vehicle. Crucially then, the principle here is that the insurer will suffer a loss by allowing the policyholder to keep their vehicle. So it’s fair for the insurer to pass on that loss. But it should only pass on that loss – what it would have received from its salvage agent. It’s not fair for an insurer to benefit from a consumer keeping their car, especially if that’s at the expense of the consumer themselves – by way of receiving a lower settlement. What’s in dispute is what that loss is. Tradex says it is 45% of the car’s market value here. But the information it’s sent us suggests that figure only comes into play when the policyholder wants to keep their vehicle. The information suggests a lower figure is what Tradex receive when the policyholder doesn’t keep the car. We’ve asked for an explanation of the two different figures, but, like our Investigator, I’m not satisfied that explanation justifies the different deductions. Tradex said “…it is considered that if the PH [policyholder] disposes of the salvage eternally, then a higher return would be expected in comparison to our base salvage return…”. I accept this may be the case, but it misses the point. What the vehicle is sold for at auction isn’t the relevant data point. That isn’t the amount Tradex receive for the vehicle from its salvage agent. The relevant figure is what the salvage company would pay Tradex for the

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vehicle before it’s sold at auction. In further correspondence Tradex told us “Salvage rates fluctuate daily, and when we handle a total-loss claim, we need to set aside a reserve for the salvage value. This allows us to settle the claim quickly without waiting for the vehicle to go through auction (in cases where the consumer is not retaining it). The XX% figure is a weighted average provided by [salvage agent] under contract.” This to me indicates that Tradex receives the lower percentage (XX%) from its salvage agent (for this value car and category write off) where the policyholder does not keep it – which will be the significant majority of claims. Importantly this does not say that if the vehicle is then sold for more at auction, the salvage agent pays Tradex more for the salvage. It appears as if the lower percentage (XX%) is a flat fee charged by the salvage agent to Tradex, regardless of what the vehicle actually sells for at auction. It is therefore this figure that is lost by Tradex, and only this figure it can pass on to its policyholder, in this case Mr R. I understand Tradex is concerned about betterment, which is a valid concern. It’s said: “In practice, the vehicle would achieve more than this once it is actually sold at auction this is where the retention of 45% comes in. The 45% rate is based on [salvage agent]’s actual and predicted sales auction data for that vehicle at a minimum. [salvage agent] have detailed insight into how much that vehicle typically sells for at auction in real-time, which informs what the market would realistically return and what a policyholder could reasonably expect if they were salvaging the vehicle themselves also.” But as well as missing the point of the deduction as explained above, I think this works on the assumption that most policyholders simply sell their car, unrepaired at auction to make a profit. In reality I’m not persuaded that’s the case. I appreciate this comes only from my experience, and the wider experience of this service, but more often, we see policyholders electing to keep their car because they want to keep it, repair it, and then carry on using it. Putting things right Tradex has already settled this claim, with the higher deduction being made for Mr R keeping the salvage. So, to put things right, Tradex should pay Mr R the difference between the 45% deduction it made, and the monetary value of the lower amount (XX%) as detailed in its table sent to us in an email dated 10 March 2026 and communicated to it by our Investigator. Interest* should be added to that amount and should be calculated from the date Tradex paid Mr R the settlement of his claim, to the date it makes this payment to him. My final decision For the reasons set out above, my final decision is that I uphold this complaint. Tradex Insurance Company PLC should now settle this complaint in line with the “Putting things right” section above. *Interest is at a rate of 8% simple per year and paid on the amounts specified and from/to the dates stated. HM Revenue & Customs may require Tradex to take off tax from this interest. If asked, it must give Mr R a certificate showing how much tax it’s taken off. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr R to accept or

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reject my decision before 11 May 2026. Joe Thornley Ombudsman

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