Motor policyholders to get £200m after some insurers short-change customers

Over 270,000 motorists will receive £200m in motor insurance compensation after the FCA found some insurers had short-changed customers on stolen or written off vehicle claims.

The compensation is for historic claims that were underpaid, breaching rules on handling claims fairly. Of this, £129m has been paid to date to almost 150,000 customers.

This comes after the FCA found that, following work with insurers, there were some cases where automatic deductions to payouts were made for assumed pre-existing damage.

“This particularly disadvantaged careful drivers who had looked after their vehicles and made it hard for them to buy like-for-like replacements. Insurers have now overhauled their claims processes in line with the regulator’s Consumer Duty,” the FCA added.

FCA warnings

The changes now made to claims practices follow action from the FCA on vehicle valuations.

In December 2022, the FCA warned insurers not to undervalue cars and other insured items when settling insurance claims and set out its expectations for firms when handling claims.

Then in March 2024, the FCA published a multifirm review, which identified shortcomings in insurers’ valuation of vehicles. It engaged directly with firms with issues and committed to investigating further.

If customers are due compensation, they will be contacted by their insurer.

Sarah Pritchard, deputy chief executive at the FCA, said: “We’ll step in when consumers aren’t getting fair value – and we are pleased to see that the practices which led to some unfair payouts have already changed.

“This means thousands of motorists are getting back what their car was really worth, in cases where cars have been stolen or written off. If you’re owed compensation, your insurer will contact you, or will have already done so – there’s nothing you need to do.”