Drivers are set to receive a massive £30million in compensation after being overcharged when renewing their car insurance.
Insurance company Direct Line admitted it was an “error” when introducing new pricing rules which were introduced by the Financial Conduct Authority (FCA) in 2022.
The aim of the new rules was to ensure existing customers of car or home insurance would not be charged more for their renewal than new customers.
However, in the case of Direct Line, drivers looking to renew were paying higher amounts than new customers, according to the FCA.
The FCA introduced new laws last January
Reuters
A spokesperson for Direct Line said that an “error” occurred when adhering to the new FCA guidelines last year.
It added: “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.”
With the £30million compensation being agreed, Direct Line has also launched a review into its past policies.
It has not been confirmed how many people will be compensated but the total estimate of repayments is expected to be “in the region” of £30million.
According to the PA news agency, not all drivers and homeowners who renewed their policy after January 2022 have been overcharged for their insurance.
Drivers will not need to do anything themselves at this stage, with Direct Line contacting affected customers directly.
There are fears from across the industry that the price of car insurance premiums could continue to rise over the coming months.
This comes after a massive 40 per cent hike in June 2023 compared with the previous year, with hard-pressed motorists being hammered.
Average annual car insurance prices surged to £743 in June, an increase of £208 compared to 2022.
Younger motorists are being hit the hardest, with average prices standing at around £1,640 for a standard annual policy.
Anna McEntee, director of insurance at Compare the Market, said: “Drivers will be concerned that the cost of car insurance is rapidly increasing.
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The total repayment amount is believed to be around £30million
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“It’s now more important than ever for people to shop around and compare prices to check you’re getting a good deal.”
