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Direct Line is about to pay out round £30 million in compensation to prospects who have been overcharged after they renewed their automotive or dwelling insurance coverage.
The insurer admitted to an “error” in implementing the monetary watchdog’s new pricing guidelines which got here into impact initially of 2022.
The error meant present insurance coverage prospects have been charged extra for his or her renewal than they might have carried out in the event that they have been a brand new buyer, the Monetary Conduct Authority (FCA) mentioned.
The admission comes after The Impartial revealed that just about 12,000 complaints have been obtained by the Monetary Ombudsman Service (FOS) prior to now 12 months – a four-year excessive – making automotive 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 automotive insurance coverage con, which discovered that automotive insurance coverage premiums have been hiked by 48 per cent over the previous 12 months.
Automobile 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 12 months, which forestall renewing dwelling and motor insurance coverage prospects 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 worth for some prospects didn’t adjust to the regulation,” Direct Line admitted.
“In consequence, these prospects have paid a renewal worth increased than they need to have.”
The insurance coverage firm mentioned it has launched a evaluation into its previous insurance policies.
Direct Line didn’t specify how many individuals have been anticipated to be compensated but it surely estimated that the whole funds to affected prospects can be within the area of £30 million.
Not all prospects who’ve renewed their dwelling or automotive insurance coverage for the reason that FCA’s new pricing guidelines got here into impact could have been overcharged, it’s understood.
Direct Line mentioned it could be contacting affected prospects instantly, and prospects don’t must do something themselves at this stage.
The corporate has ramped up costs throughout its motor and residential insurance coverage insurance policies this 12 months as the price of claims soared.
On Wednesday, the group mentioned 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.
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