UK motorists are expected to receive £200 million ($408 million) in compensation for a practice that short-changed careful drivers lodging claims for stolen or written-off vehicles.

The Financial Conduct Authority says it worked with insurers following an initial review that found cases of automatic deductions to payouts being made for assumed pre-existing damage.

An estimated 270,000 motorists are expected to receive compensation for underpaid claims, with £129 million ($263 million) already paid to almost 150,000 customers.

“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,” FCA deputy CEO Sarah Pritchard said.

“This means thousands of motorists are getting back what their car was really worth, in cases where cars have been stolen or written off.”

The automatic deductions particularly disadvantaged drivers who had looked after their vehicles, making it hard to buy like-for-like replacements.

Examples of poor practices included deducting for wear and tear reasonably expected for a vehicle of similar age and mileage, when that was already reflected in trade guide prices.

The FCA says insurers have overhauled their claims processes in line with the regulator’s Consumer Duty, which took effect in July 2023.