Motor insurers have changed their settlement and compensation practices after the 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 £200m in compensation 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.
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[2].
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[3] if they are not satisfied with the response. Customers do not need to use a Claims Management Company[4] (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[5] 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[6] (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 £50m to compensate customers who were not given a fair settlement when claiming for stolen or written off cars.
- The FCA’s Consumer Duty[2] 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:
- Pausing Guaranteed Asset Protection (GAP) insurance sales over fair value concerns. Firms made changes to commission structures, which will save consumers £70m[7].
- Reforming pricing rules[8] so customers are no longer charged more for their insurance at renewal for being an existing customer.
- Reviewing the premium finance market[9].
- A review of home and travel claims handling[10].
- Scrutinising whether the pure protection market[11] offers fair value.
- Analysis[12] showing the rise in motor premiums has largely been driven by external costs that insurers cannot control.