Direct Line is ready to pay out round £30 million in compensation to prospects who had been overcharged once they renewed their automobile or residence insurance coverage.
The insurer admitted to an “error” in implementing the monetary watchdog’s new pricing guidelines which got here into impact at the beginning of 2022.
The error meant present insurance coverage prospects had been charged extra for his or her renewal than they might have performed in the event that they had been a brand new buyer, the Monetary Conduct Authority (FCA) mentioned.
The admission comes after The Unbiased revealed that just about 12,000 complaints had been acquired by the Monetary Ombudsman Service (FOS) up to now yr – a four-year excessive – making automobile insurance coverage the third most complained-about monetary product, behind present accounts and bank cards.
The revelation follows this newspaper’s exposé into the nice automobile insurance coverage con, which discovered that automobile insurance coverage premiums have been hiked by 48 per cent over the previous yr.
Automobile insurance coverage is now the third-biggest family invoice, behind council tax and power, with hovering prices driving many motorists to promote up.
Direct Line was pressured to behave after the FCA introduced in new guidelines final yr, which forestall renewing residence and motor insurance coverage prospects from being charged larger costs than a brand new buyer could be charged.
“An error in our implementation of those guidelines has meant that our calculation of the equal new enterprise value for some prospects did not adjust to the regulation,” Direct Line admitted.
“In consequence, these prospects have paid a renewal value larger than they need to have.”
The insurance coverage firm mentioned it has launched a assessment into its previous insurance policies.
Direct Line didn’t specify how many individuals had been anticipated to be compensated however it estimated that the entire funds to affected prospects could be within the area of £30 million.
Not all prospects who’ve renewed their residence or automobile insurance coverage for the reason that FCA’s new pricing guidelines got here into impact can have been overcharged, it’s understood.
Direct Line mentioned it might be contacting affected prospects instantly, and prospects don’t have to do something themselves at this stage.
The corporate has ramped up costs throughout its motor and residential insurance coverage insurance policies this yr as the price of claims soared.
On Wednesday, the group mentioned it had appointed Adam Winslow from rival Aviva as its new chief government, and he’ll take the reins within the first quarter of 2024.