The FCA has announced a unique compensation package, said to be valued at £200 million. This new measure will help an estimated 270,000 drivers who have been financially penalized following a vehicle theft or write-off. Sarah Pritchard, the deputy chief executive of the FCA, underlined the regulator’s fierce dedication to safeguarding consumers. She acknowledged that practices leading to discriminatory payouts have long since been changed.
Cumulatively, as of last week, car insurance companies have paid out £129 million to almost 150,000 customers. This new program is a direct answer to the overwhelming demand for more support for drivers. Countless people were underinsured when their cars got stolen or totaled. The FCA’s involvement emphasizes the FCA’s role as watchdog of consumer interests, ensuring that insurance companies do right by the consumers they serve.
The used car market is one of the most volatile sectors these days. This poses new challenges for vehicle valuations, complicating insurers’ ability to provide fair compensation. Cormac Bradley, senior actuarial director at Broadstone, said that conditions were “difficult for insurers” because of ever-changing circumstances. These challenges are exacerbated by supply chain pressures and labor shortages that are currently affecting vehicle maintenance and repair.
“There’s also a higher number of cash settlements as vehicle repairs are hampered by supply chain pressures and labor shortages. Insurers need to be confident that they reflect the uncertainty appropriately in the customer’s favor to avoid undercompensation.” – Cormac Bradley
In June 2023 the FCA directed Direct Line to re-examine five years of claims. Otherwise, they wanted to make sure that any customers who were underpaid were properly compensated. In sending this clear message, Direct Line created a pot of £50 million for customers impacted by this.
The Association of British Insurers accepted that the industry was making progress in ensuring timely delivery of service even under these difficult circumstances. A rep told us that members are changing their settlement strategies to better meet their customers’ needs.
“Insurers work hard to deliver the best possible service for their customers. There has been a lot of volatility in the secondhand car market in recent years which created challenges for insurers when trying to set valuations. Our members have made changes to their settlement approach and taken the necessary steps to support customers.” – Association of British Insurers spokesperson
FCA Executive Director Sarah Pritchard spoke of the FCA’s critical role in defending the rights of consumers. In her remarks, she promised that the regulator would act anytime just compensation is not offered.
“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.” – Sarah Pritchard