FCA announces £200m motor insurance compensation scheme following claims practice review
The Financial Conduct Authority (FCA) has compelled motor insurers to revise their claims handling practices after identifying a widespread of underpayments in settlements for stolen or written-off vehicles, affecting over 270,000 motorists. Following a multi-firm review and direct engagement with insurers covering 90% of the market, the FCA found that automatic deductions for assumed pre-existing damage had led to unfair outcomes, particularly disadvantaging careful drivers. In response, insurers have paid £129m to nearly 150,000 customers so far, with total compensation expected to reach £200m. These changes align with the FCA’s Consumer Duty, which mandates fair treatment and good outcomes for consumers. The regulator’s broader efforts to improve fairness in the insurance sector include reforms to pricing, claims handling, and product value assessments.