An estimated 270,000 drivers in the UK will receive approximately £200 million in compensation from car insurers following findings from the Financial Conduct Authority (FCA) that insurers had undervalued vehicles in certain claims situations. This compensation is aimed at addressing concerns that drivers were not appropriately compensated when their vehicles were stolen or written off.
The FCA’s review highlighted that some insurance payouts were reduced due to presumed pre-existing damage. This practice particularly impacted cautious drivers who maintained their vehicles well, ultimately resulting in insufficient funds to purchase a like-for-like replacement. The FCA had previously warned insurers against undervaluing cars and related insured items during claims settlements.
In June 2023, the FCA instructed the insurer Direct Line to reassess five years of claims and provide compensation as necessary. Following this, Admiral set aside £50 million to compensate customers who had experienced underpayment. The FCA stated that as a result of its actions, insurers had revised their claims processes and would reach out to customers owed money. To date, £129 million of the total compensation has already been distributed to nearly 150,000 customers.
Sarah Pritchard, deputy chief executive of the FCA, emphasized the regulator’s role in ensuring fair value for consumers and noted that the practices resulting in unfair payouts have already started to change. For affected drivers, the FCA confirmed that insurers would either have contacted them or will do so regarding their owed compensation.
Experts noted challenges in accurately valuing vehicles amidst fluctuating car prices and increased cash settlements due to supply chain issues affecting vehicle repairs. A representative from the Association of British Insurers acknowledged the volatility in the secondhand car market and indicated that insurers have adjusted their approaches to better support customers moving forward.
Source: https://www.theguardian.com/money/2025/sep/19/car-insurers-drivers-share-compensation-fca