Direct Line has been caught overcharging loyal customers of the British insurance giant.

The UK’s second biggest car insurer has agreed to pay around £30 million to loyal customers.

It marks the first time a firm has voluntarily agreed to redress existing customers.

Direct Line had existing customers pay more than new customers to renew their policies, according to the Financial Conduct Authority (FCA).

The new FCA rules state that existing policyholders should not be charged more than new ones

The car and home insurance company discovered it had been overcharging existing customers.

It admitted to an “error” in implementing the financial watchdog’s new pricing rules, which came into effect at the start of 2022.

Direct Line did not specify how many people are expected to be compensated but it estimated that the total payments will be in the region of £30million.

The company said: “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.

“As a result, those customers have paid a renewal price higher than they should have.

“Redress will be paid to any affected policyholder.

“The current estimate of these payments is in the region of £30m.”

Direct Line, which has a market value of more than £2 billion, said it would reimburse all affected policyholders and would contact affected customers directly.

Customers do not need to do anything themselves at this stage.

The insurance giant said half of the costs related to the mistake had already been provided for in the company’s 2022 financial results.

In response, the FCA said: “Direct Line Group has agreed a voluntary requirement having charged some existing home and motor customers more for their renewal than they would have done if they were a new customer.

“Direct Line Group will carry out a review to identify all instances where a customer has been overcharged and provide appropriate redress.”

Sam Richardson, the deputy editor of Which? Money, said: “At a time when car and to a lesser extent home insurance premiums are rocketing, with insurers blaming rising claims costs, it’s shocking that customers are being hit by extra, unnecessary costs, just for being loyal to their insurer.

“This practice has been banned since the start of 2022.”

Earlier this week, the British motor and home insurer named Adam Winslow as its CEO after profits fell by 95 per cent in 2022.

Direct Line reported in March that its operating profit dropped after inflation drove up the cost of motor repairs.

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *