The regulator started an investigation into the car insurance market in December 2022 and has taken action against Direct Line as a result.

The UK’s second-biggest car insurer has been told to conduct a review of claims where vehicles had been written off “to identify any policyholders who received unfair settlements and provide them with appropriate redress”.

Direct Line said in a statement that it was reviewing all total loss claims settled between 1 September 2017 and 17 August 2022.

A notice on the insurer’s website said: “During that time, some of our car and van insurance customers who had their vehicle written off didn’t receive as much as they should have done. We’re working to identify everyone affected.

“Customers don’t need to contact us, either directly or via third parties. We’ll contact affected customers directly to put things right.”

The FCA said in December that some consumers whose cars were being written off by their insurers after an accident were being given less than the vehicle’s fair market value. This is not allowed under FCA rules and the regulator said it would take action against companies it found to be doing this. However, at the time it didn’t name any of the offending insurers.

The review follows a string of profit warnings by Direct Line caused by high inflation in its claims costs.

Customers who think their claim has been undervalued can complain to their insurer and then to the Financial Ombudsman if their complaint is not resolved.