Motor insurers are set to pay £200m in compensation to an estimated 270,000 motorists for historic claims that were underpaid, breaching rules on handling claims fairly, the Financial Conduct Authority (FCA) has stated.

The regulator said the decision comes after insurers "short-changed customers" on stolen or written off vehicle claims.

To date, insurers have paid £129m to almost 150,000 customers, but motor insurers have since changed their settlement.

The FCA has carried out detailed work with insurers, following an initial review last year which found that in some cases, automatic deductions to payouts were made for assumed pre-existing damage.

This particularly disadvantaged careful drivers who had looks after their vehicles and made it hard for them to buy like-for-like replacements.

Insurers have now overhauled their claim processes in line with the regulator’s Consumer Duty.

The regulator said that if customers are due this compensation, they will be contacted by their insurer. For anyone who is dissatisfied with how a claim is handled, they should be to their insurer first and then contact the Financial Ombudsman Service if they are not satisfied the response.

Deputy chief executive at the FCA, Sarah Pritchard, stated: "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. If you’re owed compensation, your insurer will contact you, or will have already done so - there’s nothing you need to do."

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