1m set for payouts in RAC insurance row

MORE than one million RAC members could be entitled to compensation after the group failed to make it clear that insurance premiums had risen.

Following a Daily Mail campaign, tougher rules were introduced by the City watchdog a year ago forcing insurers to disclose last year’s premium on renewal letters.

They also required firms to show a prominent and clear message to encourage customers to shop around for the best deal.

The crackdown was designed to stop insurers getting away with sneaky price rises when a policy is renewed. But the Financial Conduct Authority discovered the RAC is among several firms which have failed to flag up this information on renewal letters. The RAC has now agreed to write to all affected members to clarify the key information.

It is not clear how much compensation the RAC will offer, but some customers may be able to demand a cheaper policy.

Jonathan Davidson, of the FCA said: ‘It is simply unacceptable to see that some firms are still not being properly transparent with their customers a year on from the introduction of the rules.’

A report published last week warned drivers are paying an annual ‘loyalty tax’ of £650million by allowing their insurer to automatically renew their policy.