Direct Line is set to pay £30 million in compensation to customers who were overcharged when renewing their car or home insurance.
The insurer admitted an “error” in implementing the financial watchdog’s new pricing rules, which come into effect from the beginning of 2022.
This means existing insurance customers will be charged more for their renewal than a new Direct Line customer, the Financial Conduct Authority (FCA) said.
The FCA last year brought in new rules that prevent quoting renewing home and motor insurance customers prices that are higher than those quoted through the same channel to a new customer.
The FCA brought in new pricing rules last year, aimed at making the insurance market fairer for customers (Image: PA)
Direct Line said, “An error in our implementation of these regulations meant that for some customers our calculation of the equivalent new business price failed to comply with the regulation.”
“As a result, those customers have paid a higher renewal price than they should have.”
The insurance company has started reviewing its past policies.
Direct Line did not specify how many people are expected to be compensated but it is estimated that the total payout to affected policyholders will be around £30 million.
The PA news agency understands that customers who have renewed their policies have not been charged more since the FCA’s pricing rules came into force.
Direct Line said it would contact affected customers directly and that customers do not need to do anything themselves at this stage.
The insurance giant increased the prices of its motor and home policies this year due to rising claims costs.
Through early 2023 the average motor renewal premium increased by about a fifth – 19% year-on-year.
On Wednesday, the group said it had appointed Adam Winslow from rival Aviva as its new chief executive, and he would take over the reins in the first quarter of 2024.
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