Direct Line faces £30m bill for overcharging customers

UK insurer Direct Line has agreed with regulators to review overcharging of existing motor and home policyholders in a move that could cost it £30m to fix.

The company was forced into the move after intervention by the Financial Conduct Authority, marking the first time a formal requirement has been agreed with an insurer under the watchdog's motor and home insurance pricing rules.

"Direct Line Group will carry out a review to identify all instances where a customer has been overcharged and provide appropriate redress," the FCA said in a statement.

Under the rules existing customers shouldn't be a higher premium than if they were a new customer, to stop companies exploiting customers who don't shop for better deals.

"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. As a result, those customers have paid a renewal price higher than they should have," Direct Line said in a statement on Friday.

The current estimate of these payments is in the region of £30m of which half was provided for within the group's 2022 full year results, it added.

"Direct Line Group will carry out a review to identify all instances where a customer has been overcharged and provide appropriate redress," the FCA said in a statement.

Reporting by Frank Prenesti for Sharecast.com