FCA awards £200m compensation to 270,000 motorists after underpaid vehicle claims

Nearly 270,000 motorists will receive about £200 million in compensation after a Financial Conduct Authority review found some insurers underpaid claims for vehicles that were written off or stolen. The FCA said the underpayments breached rules on handling claims fairly. The regulator estimates 270,000 motorists will receive £200 million, with £129 million already paid to almost 150,000 people and about £71 million still owed to around 120,000 customers.\n\nCustomers due to receive compensation will be contacted by their insurer, the FCA said. The review, conducted last year, found insurers made automatic deductions from payouts on the assumption that vehicles had pre-existing damage, which the FCA said disadvantaged careful drivers who cared for their cars.\n\n\n\nThe changes come after the FCA warned insurers in 2022 not to undervalue vehicles when settling claims, and set out claim handling expectations for insurers. As a result, insurers have changed their practices to ensure they comply with Consumer Duty regulations.\n\n"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."\n\nCormac Bradley, senior actuarial director at Broadstone, said: "There's also a higher number of cash settlements as vehicle repairs are hampered by supply chain pressures and labour shortages. Insurers need to be confident that they reflect the uncertainty appropriately in the customer's favour to avoid under-compensation. This is no small challenge at a time of volatile car prices so it is pleasing that the regulator and the motor insurance industry have reached a resolution which will enable fair, historic compensation and certainty moving forward."\n\nLower payouts meant many drivers were unable to obtain like-for-like replacements. The FCA noted that cash settlements can help speed up payouts but may leave some customers without a direct vehicle replacement.\n\nThe changes are designed to ensure compliance with Consumer Duty and to deliver fair historic compensation and certainty moving forward. Insurers will contact affected customers directly; there is nothing customers need to do unless approached.\n\n\n\nThe FCA said the review and resulting reforms represent a shift toward fair value in historic motor claims and should prevent similar underpayments in the future, while giving drivers more clarity on expected outcomes.