An estimated 270,000 motorists are expected to receive £200 million in compensation, after the Financial Conduct Authority (FCA) found some insurers had short-changed customers on stolen or written-off vehicle claims.
Of this, £129 million has been paid to date to nearly 150,000 customers, relating to the historic claims, the regulator said.
The FCA 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.”
Customers who are due compensation 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 (FOS) if they are not satisfied with the response, the FCA said.
It added that customers do not need to use a claims management company (CMC) to complain or make a claim.
The changes 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 regulator published a multi-firm review which identified shortcomings in insurers’ valuation of vehicles. It engaged directly with firms with issues and committed to investigating further.
In June 2023, the FCA published a voluntary requirement 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 requirement 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 consumers, and that they are supported while using a financial product, including when they make claims.
A spokesperson for the Association of British Insurers (ABI) said: “Insurers work hard to deliver the best possible service for their customers.
“There has been a lot of volatility in the second-hand car market in recent years which created challenges for insurers when trying to set valuations.
“Our members have made changes to their settlement approach and taken the necessary steps to support customers.”
