Thousands of drivers owed £200m compensation over 'unfair' payout practices

Around 270,000 drivers are owed part of a £200m compensation pot for historic car insurance claims that were underpaid.

The FCA found that when people were claiming on their insurance for their vehicle being stolen or written off, their insurer wasn't giving them the 'fair market value' for their car, in some cases as it was assuming wear and tear / damage without any evidence. 

Laura Purkess, personal finance expert at Investing Insiders, said: "This intervention from the regulator is another huge win for consumers, who for years have been subject to unfair practices from insurers who have been trying to short-change them by undervaluing their cars when they are stolen or written off. 

"Insurers should offer customers 'fair market value' for their vehicles in these situations, but many customers have reported receiving thousands of pounds less than expected. 

"The FCA said it has seen evidence that suggests some firms have been automatically deducting money from payouts for assumed pre-existing damage, without seeing any proof of this damage first. 

"These kinds of blatantly unfair tactics undermine confidence in the insurance industry, at a time when we should be encouraging more people to ensure they are properly protected. This latest move from the FCA hopefully points towards a fairer and more transparent future for the sector.

"Around 270,000 customers are now expected to receive part of a £200m compensation pot. If you're owed money, your insurer should contact you - you don't need to do anything."