Comment & Analysis on FCA Motor Valuations Compensation

Prestige Underwriting welcomes the announcement from the FCA that over 270,000 motorists will receive compensation following reforms in how insurers treat assumed pre-existing damage and claims deductions. This is a strong step towards fairness and transparency in motor insurance claims, and essential for restoring confidence in the market.

The FCA’s findings underscore issues that are especially acute in the non-standard motor insurance market, where risks are already higher, and valuation or claims dampening practices can have disproportionate consequences for policyholders.

“This announcement reaffirms what we see every day in the non-standard space: policyholders often bear the brunt of generic assumptions or blanket depreciation. When vehicles are modified, imported, performance or contested risk models, or when drivers have past convictions – all part of non-standard motor policies – customers deserve valuations that reflect the reality of their vehicle, not assumptions which unfairly penalise them.

“At Prestige Underwriting, we are committed to ensuring our non-standard motor & van product book is both rigorous and fair. We believe in clear, evidence-based assessments; transparent communication; and underwriting practices that understand the unique characteristics of non-standard risks rather than using short-hand approximations.

“We applaud the FCA’s decision. It sends a clear signal:  we all must elevate standards, not just for standard policies, but especially where risks are complex. Non-standard customers must not be an afterthought but must be properly protected.”

Prestige Underwriting is a specialist MGA with a long-standing focus on non-standard and niche risks in Property and Motor. The company partners with a network of more than 1,300 brokers and strategic partners across the UK and Ireland, trading in Great Britain, Northern Ireland and the Republic of Ireland. Prestige Underwriting is part of the Prestige Insurance Holdings Group.

Cormac Bradley, Senior Actuarial Director at leading independent financial services consultancy Broadstone, said: “Today’s announcement from the FCA will see hundreds of thousands of drivers receive compensation for historic insurance claims. While the majority of this redress has already been paid out, the FCA estimates that a further 120,000 customers are due £71 million in additional compensation.

“The claims relate to the valuation methods that insurers use on vehicle write-off or theft of vehicle to compensate customers and it has become increasingly difficult with the pace of price fluctuations in recent years. There is further complexity around wear and tear, with the FCA suggesting that insurers were adjusting valuations on the assumption of existing damage may have been unfairly penalising careful drivers.

“There’s also a higher number of cash settlements as vehicle repairs are hampered by supply chain pressures and labour shortages. Insurers need to be confident that they reflect the uncertainty appropriately in the customer’s favour to avoid under-compensation.

“This is no small challenge at a time of volatile car prices so it is pleasing that the regulator and the motor insurance industry have reached a resolution which will enable fair, historic compensation and certainty moving forward.”