Over two hundred million pounds will be awarded in compensation to approximately 250,000 drivers, as insurers are found to have shortchanged them on settlements for totaled and stolen vehicles.
The Financial Conduct Authority (FCA) has revealed that over 270,000 motorists are set to receive a combined £200million in compensation for historic claims, as a result of some motor insurers underpaying customers with claims for written off or stolen vehicles.
The FCA's findings, which were announced in 2022, prompted a warning to insurers not to undervalue vehicles when settling claims. In response, several major insurers, including Admiral, Ageas, Allianz, Zurich, LV, and Hastings, revised their settlement and compensation practices to ensure compliance with Consumer Duty regulations.
Cormac Bradley, senior actuarial director at Broadstone, praised the resolution between the regulator and the motor insurance industry, stating that it enables fair, historic compensation and certainty moving forward. He also noted that the higher number of cash settlements is due to supply chain pressures and labor shortages affecting vehicle repairs.
As of now, £129milllion has already been paid out to almost 150,000 people. However, the FCA estimates that 120,000 customers are still owed some £71million. Customers who are due to receive compensation will be contacted by their insurer, according to the FCA.
Insurers are now required to reflect uncertainty appropriately in customer's favor to avoid under-compensation. This means that automatic deductions from payouts on the assumption that vehicles had pre-existing damage will no longer be made.
Sarah Pritchard, deputy chief executive of the FCA, expressed her satisfaction with the situation, stating that thousands of motorists are getting back what their car was really worth. Cormac Bradley echoed this sentiment, adding that many of these drivers were unable to get like-for-like replacements for their damaged vehicles due to the lower payouts.
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In conclusion, the FCA's actions have led to a significant change in the motor insurance industry, ensuring that customers are fairly compensated for their losses. This move is expected to bring much-needed relief to thousands of motorists who have been affected by underpayment in the past.
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