UK motorists to receive £200m in motor insurance compensation

After the FCA found that some insurers didn't properly compensate certain customers who claimed for a stolen or written off vehicle, motor insurers have made changes to their settlement and compensation practices.

They've also agreed to compensate many of the customers who were short-changed, handing out as much as £200m in compensation to an estimated 270,000 UK motorists.

This is already underway, and as of last week £129m has already been paid out to nearly 150,000 customers according to the FCA.

What happened?

FCA's multi-firm review published in 2024 revealed that in some cases, customers had their motor insurance payouts for stolen or written-off vehicles automatically reduced because of assumed pre-existing damage to the vehicle.

This made it difficult for some drivers to buy like-for-like replacements for their lost vehicles because payouts were unlikely to cover the cost, particularly if their vehicle was new or in good condition. The compensation insurers are awarding customers is intended to cover what was deducted from their payouts.

As well as offering compensation to wronged customers, many insurers are overhauling their claims processes in line with the FCA's Consumer Duty, which requires firms to act to deliver good outcomes for retail consumers, and support customers while using a financial product, including when they make claims.

This is just one part of the FCA's wider action to ensure customers are being fairly treated. A review of home and travel insurance claims handling by the FCA is also ongoing, as well as a review of the pure protection insurance market.

Your next steps

If you're one of the many motorists entitled to compensation, your insurer will contact you.

If you don't hear from your insurer, or if you believe that an insurer's decision in response to a claim has been unfair or inaccurate, you should speak to your insurer first.

Sometimes, asking an insurer to review your claim can be a quick way to a solution, but if you're still dissatisfied you can make a formal complaint.

If all else fails, you can escalate your complaint to the Financial Conduct Authority.