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irect Line is about to pay out £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 from the beginning of 2022.
It meant that present insurance coverage prospects had been charged extra for his or her renewal than they’d have been in the event that they had been a brand new buyer with Direct Line, the Financial Conduct Authority (FCA) stated.
The FCA introduced in new guidelines final yr which forestall renewing residence and motor insurance coverage prospects from being quoted costs that are increased than a brand new buyer could be quoted by the identical channel.
“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,” Direct Line stated.
“As a result, those customers have paid a renewal price higher than they should have.”
The insurance coverage big has kickstarted a assessment into its previous insurance policies.
Direct Line didn’t specify how many individuals are anticipated to be compensated but it surely estimated that the full funds to affected policyholders might be within the area of £30 million.
Not all prospects who’ve renewed their coverage for the reason that FCA’s pricing guidelines got here into impact can have been overcharged, the PA news company understands.
At a time when automobile and, to a lesser extent, residence insurance coverage premiums are rocketing, with insurers blaming rising claims prices, it is surprising that prospects are being hit by further, pointless prices, only for being loyal to their insurer
Direct Line stated it will likely be contacting affected prospects straight, and prospects don’t must do something themselves at this stage.
The insurance coverage big ramped up costs throughout its motor and residential insurance policies over this yr as the price of claims soared.
The common motor renewal premium jumped by almost a fifth – 19% – year-on-year over the beginning of 2023.
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.
Sam Richardson, the deputy editor of Which? Money , stated: “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.”
