Direct Line to pay £30m for overcharging

DIRECT LINE has agreed to pay £30m to customers who were overcharged when they renewed their home or car insurance, following intervention from the City watchdog.

The insurer admitted to an “error” in implementing the Financial Conduct Authority’s new pricing rules that came into effect from the start of last year.

It meant that existing insurance customers were charged more for their renewal than they would have been if they were new customers.

Direct Line denied the overcharging was a form of “loyalty penalty”, and said it had made an “error in the implementation of the rules” that meant customers paid a higher renewal price than they should have.

The FCA brought in rules last year that prevent existing home and motor insurance customers from being quoted prices higher than a new customer would be offered through the same channel.

It followed a review by the watchdog that found insurers were subjecting customers who did not shop around to a “significant loyalty penalty”.

It said: “While consumers should take responsibility for their decisions, the current market is not working well for everyone and the consumers suffering harm are often less aware of current insurance pricing practices.”

It is the first time a formal voluntary requirement has been agreed with a firm in relation to the FCA’s motor and home insurance pricing rules, the watchdog said.

Direct Line is reviewing its past policies. It did not spec- ify how many people are expected to be compensated, but estimated that the total payments to affected policyholders will be in the region of £30m.

The insurer said it would contact affected customers directly, and customers do not need to do anything themselves at this stage.

The average British motor renewal premium has leapt by nearly a fifth year on year since the start of 2023.