Direct Line has agreed to pay redress to customers today after admitting an error in the calculation of new insurance rules meant it overcharged customers by some £30m.
In a statement this morning, the insurance group said it would now undertake a “past business review” relating to pricing in its motor and home insurance business after new FCA rules were brought in from the start of last year.
“An error in our implementation of these rules has meant that our calculation of the equivalent new business price for some customers failed to comply with the regulation,” the firm said in a statement.
“As a result, those customers have paid a renewal price higher than they should have.”
Redress around £30m is now expected be now paid to policyholders, only half of which was provided for in the group’s latest full year results.
City watchdog the Financial Conduct Authority said in a statement the firm will now carry out a review to identify “all instances where a customer has been overcharged and provide appropriate redress”.
The review comes as the regulator tightens the screws on insurers amid fears they are taking advantage of vulnerable customers amid a cost of living crunch.
The FCA said a review of the sector showed some good practices but that insurers were taking a long time to deal with complaints and people that were not given appropriate settlements.
“The regulator discovered instances of motor insurance customers being offered a price lower than their car’s fair market value after it had been written off, which is against FCA rules,” the watchdog said earlier this year.
The latest order for Direct Linefollows the insurer being ordered to reassess five years of claims in July after admitting it had underpaid some customers who had their cars and vans written off.
The firm has called in former Aviva UK chief Adam Winslow to try and lead a turnaround following a poor string of results.