£200m to be paid out to 270,000 motorists short-changed on car insurance

The Financial Conduct Authority (FCA) has confirmed that 270,000 motorists are to receive a total of £200 million in compensation after an investigation found insurers were underpaying claims for written-off or stolen vehicles. The payments, which average around £740 per person, are being made after the regulator intervened to stop firms from making unfair deductions from settlement offers.

Why is compensation being paid to motorists?

The compensation has arisen after the FCA conducted a review of motor insurance claims where vehicles were stolen or written off. When scrutinising the vehicle valuation process, the FCA found that in some cases, insurers were undervaluing vehicles, making assumptions on pre-existing damage through normal usage. This practice was deemed unfair to vehicle owners whose vehicles were well-maintained by careful drivers, leading to undervalued insurance claims.

The FCA warned insurers in 2022 to review their processes, ensuring consumers receive the correct financial outcome when settling claims. At the time, it was found that some insurers were only increasing valuations when the customer had made a complaint. In March 2024, the FCA conducted a multi-firm review of up to 18 insurance providers, which accounts for around 90% of the motor insurance market, resulting in the £200 million compensation order. The FCA says that the order was necessary "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."

Who will compensation be paid to?

The compensation will be paid to insurance claimants with historic motor insurance claims where their vehicle was undervalued after it was stolen or written off. Of the 270,000 claimants, 150,000 will already have received their compensation, totalling around £129 million, with a further £71 million still to be paid out.

How to claim compensation

Motorists who are due compensation will receive it directly from the car insurance provider without any need to come forward and claim it. The onus is on the insurer to ensure that compensation reaches all those who are affected and the FCA has stated that customers do not need to use the services of a Claims Management Company to. If you believe you are due compensation as a result of this review, you will likely hear directly from the insurance provider. However, if you do not and feel that you have received an unfair claim settlement, you can contact the insurance provider in the first instance. Should you still feel that your claim has not been handled fairly, you should contact the Financial Ombudsman Service.