The regulator says it's hearing from increasing numbers of vehicle owners who have been left to pay significant sums because they didn't tell their car insurer about enhancements made after taking out the policy and unknowingly invalidating their cover.
So what counts as a modification? And what insurance do you need? Here's everything you need to know before you refurbish your set of wheels.
What counts as a modification when it comes to car insurance?
Any car that has been changed in some way since it was manufactured is considered to be a modified vehicle. Enhancements can range from custom paintwork to upgraded exhaust systems or engine tuning. Not declaring these features can lead to your cover being invalidated or claims being rejected in the event of an accident.
Often drivers are not aware that alterations, even minor ones, can also lead to higher premiums. For example, installing a new entertainment system could increase the risk of theft.
One driver told the FOS they only found out their policy was void - because they hadn't informed the provider of changes made - after their car was stolen. Had the insurer known about the modifications earlier, they wouldn’t have sold him the policy and the FOS agreed with the action taken against the driver.
In other cases, the FOS did find insurers were playing fast and loose with the rules. Another driver complained that his policy was voided and claims declined following an accident because the alloy wheels fitted were just three inches larger that the manufacturer’s standard size.
The FOS felt that an average consumer would not spot the difference between the new and standard tyres. As a result, the insurer was ordered to reinstate the policy and take other steps to put things right, including compensating the consumer for distress and inconvenience.
Find out more:What have insurers noticed?
Unfortunately, the FOS doesn't formally collect information on complaints about car modifications and insurance, so their statement that cases related to this issue are increasing isn't backed up by any hard data.
Which? approached some of the biggest car insurance providers to see if they'd noticed a similar trend.
Admiral told us that, so far this year, it has voided only six claims due to 'significant modifications' that hadn’t been declared. The most common refusals involved customers using their vehicles for business purposes - catering, for example - and converting their vans accordingly.
Hastings Direct said it has not seen a rise in cases and its complaint levels remain low.
With car insurance premiums still very high, you may be worried about costs increasing and be tempted to stay quiet about modifications - but when it comes to insurance, honesty is always the best policy. Your silence might invalidate your insurance and cost you far more if you eventually need to claim.
Find out more:Why do modifications matter?
You might see those shiny new wheels or state of the art exhaust system as an improvement, but insurers take a broader view of any changes you make to the vehicle.
Even seemingly small modifications can affect a vehicle's value, so insurers need to know about them in order to price your cover accurately. Insurers also keep detailed data on previous claims by all their drivers and, because certain modifications may be associated with higher claims rates, providers also need to take those into account when calculating your premium.
You may find some insurers won't offer policies that cover particular modifications. Those with the greatest insurance cost tend to be performance-related, such as adding a turbo or supercharger. A more powerful engine in the car, for example, might not only affect the performance but the way its owner drives. Plus if it’s not installed correctly, it could increase the chance of an accident or breakdown.
While many modifications are legal, other alterations could be breaking the law and insurers will not cover you at all. For example, tinted headlights, very loud exhausts (above 74 decibels), and use of nitrous oxide are all illegal and could mean you face hefty fines and penalties.
Find out more:What are the most common types of modification?
To get an idea of what insurers might count as a modification, take a look at the table below. It shows the most common enhancements made by drivers, according to recent data from comparison site Compare the Market:
Should you take out modified car insurance?
Anything the insurer says is a modification will need to be declared. So make sure you carefully read the small print of your policy document or pick up the phone and discuss with your provider if your car is non-standard in any way.
If you are not covered under regular insurance, it might be worth taking out modified car insurance. With this, you'll get all the same benefits you would expect from a standard insurance policy, but the modifications will also be insured.
That additional cover can help if you need to claim for repairs to one of the modifications and/or the rest of the vehicle.
Modifications also affect a vehicle's value, often increasing it. If you've not paid for insurance that reflects this, you're likely to be under-insured. This means the insurer will only cover the claim up to the percentage of the premium paid, and they would be responsible for any costs above that figure.
Find out more:How can I reduce the cost of cover?
Saving money on modified car insurance requires perseverance. It won't always be possible to get like-for-like quotes from price comparison sites. In any case, there are specialist insurers that aren't listed on these sites. That means doing some ringing around.
Alternatively, an independent insurance broker should know where to find the best deals for your needs.
Another possibility is a policy arranged through a car club or owners' club if you're a member of one.
One option to consider is an 'agreed value' policy, which recognises the time and money spent on a modified vehicle. You agree the value of your car with the insurer and it will pay out this amount if your car has to be written off, regardless of its market value. However, these policies are usually more expensive.
Don't forget the usual ways of cutting the cost of your car insurance. For example, declare your limited mileage if you don't drive the vehicle much, mention any other vehicles you own and any named drivers who may be considered less risky than you.
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