Motor insurers have overhauled their settlement and compensation practices after a review from the Financial Conduct Authority found some insurers had underpaid customers with claims for written off or stolen vehicles.
The FCA said insurers short-changing claimants breached rules on handling claims fairly.
An estimated 270,000 motorists will receive a combined £200million in compensation payments for these historic claims, with £129milllion having already been paid out so far to almost 150,000 people.
The FCA estimates that 120,000 customers are still owed some £71million. Customers who are due to receive compensation will be contacted by their insurer, the FCA said.
The review, which took place last year, found insurers made automatic deductions from payouts on the assumption that vehicles had pre-existing damage.
The FCA says this disadvantaged careful drivers who had looked after their vehicles.
The changes come after the FCA warned insurers in 2022 not to undervalue vehicles when settling claims, and set out claim handling expectations for insurers.
As a result of the review, insurers have changed their practices to ensure that they comply with Consumer Duty regulations
The lower payouts mean that many of these drivers were unable to get like-for-like replacements for their damaged vehicles.
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.’
As a result of the review, insurers have changed their practices to ensure that they comply with Consumer Duty regulations.
Cormac Bradley, senior actuarial director at Broadstone, said: ‘There’s also a higher number of cash settlements as vehicle repairs are hampered by supply chain pressures and labour shortages.
‘Insurers need to be confident that they reflect the uncertainty appropriately in the customer’s favour to avoid under-compensation.
‘This is no small challenge at a time of volatile car prices so it is pleasing that the regulator and the motor insurance industry have reached a resolution which will enable fair, historic compensation and certainty moving forward.’
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