More than 270,000 motorists are in line for compensation worth around £200m after insurers were found to have unfairly reduced claim settlements.
FCA Orders Compensation After Unfair Payouts
The Financial Conduct Authority (FCA) has announced that hundreds of thousands of drivers will be compensated, with an average payout of £740 each, after insurers were found to have underpaid claims for stolen and written-off vehicles.
The regulator said more than 270,000 motorists were “short-changed” when insurers reduced claim values based on non-existent damage. A total of £200m in compensation is expected to be paid out, including £129m already reimbursed to 150,000 customers.
Insurers to Contact Affected Drivers
The FCA confirmed that eligible drivers will be contacted directly by their insurers. Customers have been warned not to use law firms or claims management companies, which often charge unnecessary fees for compensation claims.
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.”
Background to the Ruling
The action follows an FCA review in March 2024, which found insurers were offering lowball settlements despite a 2022 warning.
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Direct Line Group subsequently launched a review of five years of settlements.
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Admiral set aside £50m in August 2025 to fund potential payouts.
Wider Industry Compensation
The announcement comes as the car finance industry also faces a major compensation bill. Following a Supreme Court ruling in July 2025, lenders may have to pay between £9bn and £18bn to customers who were mis-sold car loans.
