Motor insurers have changed their settlement and compensation
practices after the Financial Conduct Authority (FCA) found some insurers had
short-changed customers on stolen or written off vehicle
claims.
It means that an estimated 270,000 motorists are expected to
receive £200 million in compensation for historic claims that
were underpaid, breaching rules on handling claims fairly. Of
this, £129 million has been paid to date to almost 150,000
customers.
The FCA has carried out detailed work with insurers, following an
initial review last year, which found that in some cases,
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.
Sarah Pritchard, deputy chief executive of 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.”
If customers are due this compensation, they will be contacted by
their insurer. For anyone else who is dissatisfied with how a
claim is handled, they should speak to their insurer first and
then contact the Financial Ombudsman Service if they are not
satisfied with the response. Customers do not need to use
a Claims Management Company
(CMC) to complain or make a claim.
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.
- In March 2024, the FCA published a multi-firm review (MFR)
which identified shortcomings in insurers' valuation of
vehicles. It engaged directly with firms with issues and
committed to investigating further. The MFR included 12 firms
and the regulator engaged with a further 6 firms, covering
around 90% of the market.
These changes reflect the FCA's focus to drive improvements to
support a well-functioning retail insurance market which helps
consumers navigate their financial lives, provides peace of mind
and supports growth through the effective management of risk.
Notes to editors
- In June 2023, the FCA published a Voluntary Requirement
(VREQ) in relation to vehicle valuations on the Financial
Services Register. This required Direct Line Group to review five
years of claims outcomes and pay redress where appropriate. The
VREQ has since been removed.
- In August 2025, Admiral announced it had set aside £50
million to compensate customers who were not given a fair
settlement when claiming for stolen or written off cars.
- The FCA's Consumer Duty requires
firms to act to deliver good outcomes for retail consumers, and
that they are supported while using a financial product,
including when they make claims.
- Wider action from the FCA to make sure consumers get fair,
competitive prices and claims are handled fairly and promptly
includes:
