Compensation to be distributed to approximately 270,000 drivers due to short payments received
In a significant move to ensure fairness and transparency, the Financial Conduct Authority (FCA) has been at the forefront of addressing concerns regarding unfair payouts for stolen or written-off vehicle claims.
The FCA's Consumer Duty, implemented in 2021, requires firms to act in the best interest of consumers, including when they make claims. This duty has led to several changes within the insurance sector.
As a result of the FCA's investigations, it was discovered that some insurers had short-changed customers, totalling an estimated £200 million. To rectify this, insurers have overhauled their claims processes in line with the Consumer Duty.
For instance, Admiral set aside £50 million to compensate customers who were not given a fair settlement for stolen or written-off cars in August 2025. Over £129 million has been paid to nearly 150,000 customers in compensation for historic claims.
The Association of British Insurers (ABI) has stated that insurers work hard to deliver the best possible service for their customers. However, in some cases, automatic deductions to payouts were made for assumed pre-existing damage, particularly disadvantaging careful drivers.
In response to these concerns, the FCA published a multi-firm review identifying shortcomings in insurers' valuation of vehicles in March 2024. The FCA also warned insurers not to undervalue cars and other insured items in December 2022.
The FCA's requirement for Direct Line Group to review claims outcomes and pay redress has since been removed. However, in June 2023, the FCA published a voluntary requirement in relation to vehicle valuations on the Financial Services Register, requiring Direct Line Group to review five years of claims outcomes and pay redress where appropriate.
If customers have any questions or concerns about their compensation, they should contact their insurer directly. The FCA advises that anyone dissatisfied with how a claim is handled should speak to their insurer first and then contact the Financial Ombudsman Service (FOS) if they are not satisfied with the response.
It's important to note that customers do not need to use a claims management company (CMC) to complain or make a claim. Thousands of motorists are expected to receive compensation for unfair payouts related to stolen or written-off vehicle claims.
The FCA's deputy chief executive, Sarah Pritchard, stated that the practices which led to some unfair payouts have already changed. The FCA continues to monitor the industry to ensure continued compliance with the Consumer Duty.
In conclusion, the FCA's Consumer Duty has led to significant changes within the insurance sector, ensuring fairer payouts for customers who have been affected by stolen or written-off vehicle claims.
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