Improvement in Motor Claims Handling is Demanded by FCA, as Per Statement
The Financial Conduct Authority (FCA) has announced new regulations aimed at improving fairness, transparency, and timescales in motor insurance claims handling, as well as controlling costs related to credit hire and referral fees from credit hire firms and claims management companies (CMCs).
Key points from FCA's recent communications and reviews include:
Improving Claims Handling
The FCA is emphasizing that motor claims must be handled promptly and fairly, addressing poor practices where claims handling has been slow or unfair. This is part of a wider regulatory push to improve claims handling standards across motor and home insurance markets.
Financial Promotions by CMCs
The FCA issued a letter on 31 July 2025 to CMCs engaged in motor finance-related claims management, warning against financial promotions that exaggerate the value of claims, create false urgency, or sign up consumers without consent. CMCs must ensure their promotions are clear, fair, and not misleading.
Referral Fees and Charges
Both the FCA and the Solicitors Regulation Authority (SRA) jointly warned law firms and CMCs to comply with rules on referral fees and commission claims following the Supreme Court judgment on motor finance commissions. Key requirements include:
- Law firms and CMCs must inform clients about the possibility of a free redress scheme and allow clients to pursue claims themselves without charge.
- They must disclose clients’ rights to terminate agreements and any fees payable if they do not proceed with claims.
- Any fees from clients must be fair, reasonable, and reflect actual work done.
- CMCs must inform customers of their right to exit agreements at any time, with reasonable fees reflecting work performed.
Percentages of Estimated Values or Payments
While specific new percentage caps on estimated claim values or credit hire costs were not detailed explicitly in the latest FCA statements, the focus is on transparency, reasonableness, and fairness of all fees and costs charged or claimed by firms involved in motor insurance claims.
Credit Hire Costs
The FCA, as part of the Government’s Motor Insurance Taskforce, has highlighted significant increases in motor insurance claim costs above inflation and is urging coordinated action across industry and regulators to curb rising costs, including those related to credit hire. The FCA's ongoing reviews aim to control these external cost pressures.
Future Consultations and Redress Scheme
Following the Supreme Court's judgment on motor finance commissions, the FCA plans to consult (expected in October 2025) on an industry-wide compensation scheme with clear rules for claim assessment and calculation, expected to be accessible and understandable for consumers, and effective from 2026.
In addition to these measures, the FCA is investigating issues with write-off valuations offered by motor insurers. Sarah Pritchard, deputy chief executive of the FCA, has stated that there is more work to do on claims handling, particularly in the home and travel sector. The FCA's evaluation of its pricing reforms showed they are having the intended impact on the price gap between new and existing customers in both the motor and home markets.
Everyone who has had a claim settled by an insurance firm feels they have a grievance regarding the write-off valuations offered. The FCA has warned insurance firms not to undervalue cars and other insured items when settling insurance claims. The FCA continues its investigation into the write-off valuations offered in the past by motor insurers, which could lead to a huge compensation bill.
These regulatory moves strongly target enhanced consumer protection and cost control within motor insurance claims and related services.
The Financial Conduct Authority (FCA) is focusing on improved motor claims handling that is prompt and fair, to address sluggish or unfair practices. This regulation aims to enhance fairness, transparency, and shorten timescales in motor insurance claims handling.
CMCs engaged in motor finance-related claims management must tread cautiously with financial promotions and ensure they are not misleading, avoiding tactics such as exaggerating claims, creating false urgency, or signing up consumers without consent.
The FCA is planning consultations on an industry-wide compensation scheme, with clear rules for claim assessment and calculation, to address issues arising from the Supreme Court's judgment on motor finance commissions. This scheme is expected to be effective from 2026.
