UK automobile insurers are set to return £200 mn to roughly 270,000 policyholders after regulators found historic underpayments and unfair handling of claims, according to the Financial Conduct Authority.
The FCA said insurers have begun contacting affected customers directly. Nearly £129 mn had already been paid to around 150,000 policyholders.
The repayment follows a 2024 review that identified practices where carriers made automatic deductions for assumed pre-existing damage.
Regulators found this penalized careful drivers and often prevented them from affording like-for-like replacements when their cars were stolen or written off.
Alongside the repayments, the FCA said insurers have updated their claims processes to comply with the regulator’s consumer duty framework.
Deputy Chief Executive Sarah Pritchard said the changes mean thousands of motorists will now receive the fair value of their vehicles.
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
Sarah Pritchard, FCA Deputy Chief Executive
“This means thousands of motorists are getting back what their car was really worth, in cases where cars have been stolen or written off,” Sarah Pritchard said.
The Association of British Insurers confirmed its members had revised claims practices and strengthened consumer support. An ABI spokesperson noted that volatility in the second-hand car market created valuation challenges but said insurers continue to focus on delivering fair outcomes for customers.
Insurers work hard to deliver the best possible service for their customers. There has been a lot of volatility in the secondhand car market in recent years which created challenges for insurers when trying to set valuations.
The case highlights the regulator’s increasing scrutiny of claims practices and signals a stronger push for accountability across the motor insurance sector.
