More than 270,000 drivers could be in line to receive a staggering £200million in compensation from motor insurance claims.
The Financial Conduct Authority has issued a notice for drivers that they could be eligible to receive a portion of a £200million settlement.
It comes as motor insurers changed their settlement and compensation packages after the FCA found that some insurers had "short-changed" customers on stolen or written off vehicle claims.
The compensation will be for historic claims that were underpaid, which breached rules on fair claims handling.
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Around £129million has already been paid to around 150,000 customers following an FCA review last year.
It found that, in some cases, automatic deductions to payouts were made for assumed pre-existing damage to vehicles.
The FCA reported that the practice "particularly disadvantaged" motorists who took great care of their vehicles.
Insurance companies have now amended their claims processes to ensure they adhere to the FCA's Consumer Duty rules.
Thousands of drivers could be owed compensation from unfair insurance payouts
|GETTY
This is designed to create a high standard of consumer protection across various financial services by putting customers at the forefront of any actions.
Sarah Pritchard, deputy chief executive of the FCA, said the regulator would intervene when consumers are not getting "fair value".
She added: "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."
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If people are owed compensation, their insurer will contact them, which they may have already done. Drivers do not need to take any additional measures.
However, in the event that drivers are dissatisfied with how their claim is being handled, they are advised to speak with their insurer first before contacting the Financial Ombudsman Service.
The FCA first issued a warning in December 2022, calling on insurers not to undervalue cars when settling insurance claims.
Last March, the FCA identified shortcomings in the valuation of vehicles, with a multi-firm review identifying 12 companies that may have done this.
The FCA revealed that motor insurance claim expenses surged by £2.3billion between 2019 and 2023 | GETTYThe regulator also took steps to engage with a further six firms, which covered around 90 per cent of the market.
The FCA clarified that the action being taken was designed to support the insurance market and provide consumers with peace of mind.
Insurance giant Admiral announced last month that it was setting aside £50million to compensate customers who didn't receive a fair settlement when claiming for their car.
The FCA has also paused Guaranteed Asset Protection (GAP) insurance sales in response to fair value concerns, which is estimated to save firms around £70million.