The cash cop out: Which? reveals how accepting a cash settlement from your home insurer could leave you out of pocket
There are three main ways an insurance claim can be resolved successfully. The insurer could take it upon itself to repair or replace your losses, it could offer a cash settlement, or pursue a combination of the two.
When Which? carried out a survey of 2,804 people who had made a claim on their home insurance in the last two years, of those whose claims were either fully or partially accepted, four in ten (41%) were granted direct repair or replacement, roughly the same number were offered a cash settlement (38%), and one in five (19%) were offered a combination of these*.
While accepting a cash payout can seem like a quick, clean way to resolve what could otherwise be a lengthy claim process, in some cases claimants can risk being left out of pocket in the long run.
For example if your house has been damaged and requires extensive repairs, you may not know the full cost of restoring it until the work is well underway – and therefore whether the insurer’s settlement offer was adequate.
Sarah Richards from North Devon told Which? that the cash settlement she was granted by her insurer for repair work after an escape of water in her home was “woefully low”. Discussing her experience, she said when loss adjusters visited she was encouraged to sign paperwork to certify they had visited - not realising she was also agreeing to a cash settlement and the closure of her case. “It was a terrible experience, I was made to feel like a criminal for making a claim,” she told Which?. She was horrified that she was left relying on her savings to put right the extensive damage to her bedroom - and said she was worried how many others may have been left in similar circumstances.
In July, the FCA warned in its claims handling review that some firms may be offering cash settlements primarily to contain their own costs, without considering customers’ best interests.
The regulator also highlighted ‘legal risks’ where cash settlements reflect discounted rates from an insurer’s suppliers and contractors that would not be available to customers. Which? is concerned that this, combined with rapidly rising costs for many trades, means consumers may be likely to underestimate the full cost of repair work.
Over the past year, Which? has campaigned to End the Insurance Rip-Off and has produced a series of research reports exposing poor customer experiences - from widespread consumer confusion over what is covered by a policy, to frustrating and substandard treatment when people need to make a claim.
Given the scale of harm faced by consumers, Which? believes the regulator's response to its 2025 claims-handling review, and a series of previous regulatory reviews, has been insufficient.
Which? has therefore taken the extraordinary step this week of using its statutory powers to launch a super-complaint to the financial regulator, calling for a fundamental reset in how insurance companies treat their millions of customers.
Sam Richardson, Deputy Editor of Which? Money, said:
“When you’re vulnerable, perhaps in the wake of a distressing event like a burglary or when dealing with the fallout from a fire or flood, it can be easy to accept the first offer your insurer makes - but it’s important to weigh if this will be in your longer term interests.“This week, Which? has taken the extraordinary step of using its statutory powers to launch a super-complaint to the Financial Conduct Authority (FCA) over its concerns about the home and travel insurance markets.
"It’s time for the FCA to tackle poor behaviour in these markets once and for all, taking enforcement action where necessary to force action and act as a deterrent. This super-complaint should mark a turning point that leads to fundamental changes in how insurance companies treat their customers.”
-ENDS-
Notes to editors
Super-complaint: On 23rd September 2025, Which? submitted a super-complaint to the FCA. Find a press release outlining the action here and read the super-complaint in full here.
Read more about the FCA findings on use of cash settlements.
Survey: Which? surveyed 2,804 home insurance customers between 18th June and 1st July 2025 about their recent experiences. Fieldwork was carried out online with the Connect panel and members of the public by Deltapoll.- *2,342 respondents’ claims were either accepted in full or in part. Of these, 41% were granted direct repair or replacement, 38% were offered a cash settlement and 19% were offered a combination of these. The remainder selected ‘other’ or ‘don’t know’.
When offered a cash settlement:
Know your rights – Check what your policy wording says your options are when offered a cash settlement - and ask your insurer about alternatives.
Check the amount carefully and ask for a breakdown - Will you be able to restore things to the same standard as before? How did the insurer arrive at this number? Is it based on a discounted rate you can’t access?
Speak up if you need support – If managing repairs yourself feels overwhelming let your insurer know. They are required to take this into account and provide extra help.
Know when to escalate - If you feel your insurer is forcing you to accept a settlement and you think the amount offered is unfair, make a formal complaint to the insurer. If you’re not satisfied with the outcome of your complaint, you should escalate it to the Financial Ombudsman Service.
About Which?
Which? is the UK’s consumer champion, here to make life simpler, fairer and safer for everyone. Our research gets to the heart of consumer issues, our advice is impartial, and our rigorous product tests lead to expert recommendations. We’re the independent consumer voice that influences politicians and lawmakers, investigates, holds businesses to account and makes change happen. As an organisation we’re not for profit and all for making consumers more powerful.
The information in this press release is for editorial use by journalists and media outlets only.