Insurance giant, Direct Line to pay out £30m after overcharging loyal customers.

By Woop / 4th September 2023
Insurance customers of direct line

The UK’s second biggest car insurer, Direct Line, will pay about £30m to customers who were charged more than they should have been to renew home and car insurance policies.

The company discovered the overcharging problem after the incorrect implementation of the new pricing practice regulation that came into force in January 2022. Under these rules, existing customers should not be charged more than if they were new customers.

Direct Line 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 this regulation, and as a result, those customers have paid a renewal price higher than they should have. It is thought that to redress those policyholders that are affected, it will be in the region of £30 million in repayments.

With a market value of more than £2bn, Direct Line said it would reimburse all affected policyholders and that half of the costs related to the error had already been recognised in the company’s 2022 financial results.

Direct Line has agreed to a voluntary requirement having charged some existing motor and home customers more for their renewal than they would have done if they were a new customer,” the FCA said. “Direct Line Group will carry out a review to identify all instances where a customer has been overcharged and provide appropriate redress.”

This is the second time Direct Line has been in the press recently where they agreed in June to go back through five years of motor insurance claims after admitting it underpaid some customers who had their vehicle written off. The FCA ordered the company to review the claims after an investigation into the market.

Deputy editor of Which? Money, Mr Sam Richardson, said “At a time when car 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.

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