Car written off or stolen? Insurers to pay £200m in compensation after short-changing 270,000 motorists – here's what you need to know

Insurers underpaid 270,000 motorists

Regulator the Financial Conduct Authority (FCA) has found that some insurers routinely knocked down the value of vehicles when settling claims for stolen or written-off cars. The FCA says these insurers made automatic deductions for "assumed" pre-existing damage – even if there wasn't evidence of damage.

In particular, this meant many careful drivers couldn't afford a like-for-like replacement vehicle, breaching rules on treating customers fairly.

The regulator says insurers have now overhauled their claims processes under its Consumer Duty rules, which require firms to deliver fair outcomes for customers including supporting them while using a financial product and when they make claims. The FCA has also warned firms that it will step in again if similar practices resurface.

This follows an initial warning from the FCA to insurers in December 2022 not to undervalue cars and other insured items when settling claims. In March 2024, the FCA then published details of a review into the issue looking at 12 firms, covering around 90% of the market.

You'll be contacted by your insurer if you're impacted

The regulator expects around £200 million in total to be paid back to 270,000 motorists. Here are the key need-to-knows:

• Nearly 150,000 people have already received £129 million in redress. Another £71 million is expected to be paid to the estimated remaining 120,000 impacted motorists by early 2026. This is happening automatically – the FCA warns that you don't need to use a Claims Management Company (CMC) to complain or make a claim.

• If you're due compensation, your insurer will contact you – but beware scammers taking advantage of this. The FCA wouldn't tell us how insurers will contact affected customers or what these communications will say – it only told us that you don't need to do anything. But always remain cautious: don't click on links in suspicious emails or texts – if in doubt, go directly to your insurer's official website or phone line. See our Stop Scams guide for further guidance on how to protect yourself.

• Insurers are expected to use tracing services if you've moved or changed your contact details. So even if you've switched insurer or address, you should still be contacted – of course, as above, contact your insurer directly if you think you're impacted but haven't heard anything.

• We know that Admiral and the Direct Line Group, which includes Churchill and Direct Line, are among the impacted insurers. But the FCA wouldn't confirm any others. In June 2023, the FCA required the Direct Line Group to review five years of claims outcomes going back to 1 September 2017 and to pay redress where appropriate. Meanwhile in August 2025, Admiral announced it had set aside £50 million to compensate customers who were not given a fair settlement when claiming for stolen or written off cars.

• Payouts will cover the difference between what you got and what you should have received if your car had been fairly valued. You'll also get 8% simple interest on top. The FCA says insurers should take a consistent approach on redress payments, though some variation is possible due to each insurer's specific failings. Admiral, for example, told us it will pay out the difference in valuations after its internal systems failed to respond to factors including "significant volatility" in used car prices.

• Further details are unclear. We don't know the exact timeframes covered or how much on average you'll be refunded, for example. These details are expected to differ by insurer.

• Unhappy with how your insurer has handled the compensation process? You still have your normal complaint rights. First, contact your insurer directly and raise a formal complaint. It'll then have eight weeks to consider your complaint and give you a final response. If that doesn't resolve your problem, you can then escalate your complaint to the free Financial Ombudsman Service.