More than 270,000 UK motorists are set to receive a collective £200 million in compensation after a sweeping review by the Financial Conduct Authority (FCA) prompted motor insurers to overhaul their claims settlement processes.
The FCA’s intervention followed findings that some insurers had systematically underpaid customers on claims for stolen or written-off vehicles, breaching rules on fair claims handling. To date, nearly 150,000 policyholders have already received £129 million in redress, with the remainder expected to follow.
This regulatory action is part of a broader drive by the FCA to ensure fair value and robust consumer protection across the insurance sector. In December 2022, the FCA warned insurers against undervaluing vehicles and other insured items when settling claims, setting out clear expectations for claims handling. This was followed by a multi-firm review in March 2024, which identified shortcomings in vehicle valuations across 12 firms, with the FCA engaging a further six companies - together representing around 90% of the market. The FCA’s ongoing efforts aim to foster a well-functioning retail insurance market that supports consumers’ financial wellbeing, provides peace of mind, and encourages growth through effective risk management.
The FCA’s detailed work with insurers - initiated after a review last year - uncovered that certain firms were making automatic deductions from payouts for assumed pre-existing damage. This practice disproportionately affected careful drivers, making it difficult for them to replace their vehicles on a like-for-like basis. In response, insurers have now revised their claims processes to align with the FCA’s Consumer Duty requirements, which mandate that firms deliver good outcomes for retail consumers and support them throughout their financial journey, including during claims.
Sarah Pritchard, deputy chief executive of the FCA, commented: “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.”
Motorists eligible for compensation will be contacted directly by their insurer. Customers dissatisfied with a claims outcome are advised to first approach their insurer, and if unresolved, escalate the matter to the Financial Ombudsman Service. The FCA also reminds consumers that there is no need to use a Claims Management Company (CMC) to make a complaint or claim.
The FCA’s focus on fair value and claims handling has already led to significant industry changes. In June 2023, the regulator imposed a Voluntary Requirement (VREQ) on Direct Line Group, mandating a five-year review of claims outcomes and redress where appropriate - a requirement that has since been lifted. More recently, in August 2025, Admiral announced it had set aside £50 million to compensate customers who had not received fair settlements for stolen or written-off vehicles.
Wider FCA actions to protect consumers and ensure competitive pricing include pausing Guaranteed Asset Protection (GAP) insurance sales over fair value concerns - prompting commission structure changes expected to save consumers £70 million - reforming pricing rules to prevent existing customers from being charged more at renewal, reviewing the premium finance market, and scrutinising claims handling in home, travel, and pure protection insurance. FCA analysis also indicates that the recent rise in motor premiums has largely been driven by external costs beyond insurers’ control.
