Direct Line is ready to pay out round £30 million in compensation to clients who had been overcharged after 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 in the beginning of 2022.
The error meant current insurance coverage clients had been charged extra for his or her renewal than they’d have performed in the event that they had been a brand new buyer, the Monetary Conduct Authority (FCA) stated.
The admission comes after The Impartial revealed that nearly 12,000 complaints had been obtained by the Monetary Ombudsman Service (FOS) prior 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.
Automotive insurance coverage is now the third-biggest family invoice, behind council tax and vitality, with hovering prices driving many motorists to promote up.
Direct Line was compelled to behave after the FCA introduced in new guidelines final yr, which stop renewing residence and motor insurance coverage clients from being charged increased costs than a brand new buyer can be charged.
“An error in our implementation of those guidelines has meant that our calculation of the equal new enterprise value for some clients did not adjust to the regulation,” Direct Line admitted.
“Because of this, these clients have paid a renewal value increased than they need to have.”
The insurance coverage firm stated it has launched a assessment into its previous insurance policies.
Direct Line didn’t specify how many individuals had been anticipated to be compensated but it surely estimated that the entire funds to affected clients can be within the area of £30 million.
Not all clients who’ve renewed their residence or automobile insurance coverage for the reason that FCA’s new pricing guidelines got here into impact may have been overcharged, it’s understood.
Direct Line stated it might be contacting affected clients straight, and clients 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 stated it had appointed Adam Winslow from rival Aviva as its new chief govt, and he’ll take the reins within the first quarter of 2024.