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Insurer Direct Line is to spend £30mn refunding customers after admitting it overcharged a few of them for his or her residence and motor cowl.
Under guidelines launched by regulators final yr, insurers have to cost current customers the identical at renewal as they’d cost new customers.
Direct Line on Friday mentioned it had not carried out that in some circumstances due to “an error in our implementation of these rules”. As a end result, it mentioned some customers had paid a better renewal worth than they need to have.
The firm mentioned it might refund anybody who had been overcharged. That will price it £30mn, of which half was offered for within the 2022 outcomes.
The information is a contemporary blow to the insurer, whose chief government left this yr after a string of revenue warnings and a dividend lower. This week, it appointed Aviva’s Adam Winslow as its new chief government, although he is not going to begin till subsequent yr.
In June, the Financial Conduct Authority ordered Direct Line to perform a evaluate of claims paid out between 2017 and 2022 after it underpaid some automotive and van insurance coverage customers.
The firm’s share worth has nearly halved over the previous two years. It fell an extra 1.8 per cent in early buying and selling on Friday.
The FCA’s pricing guidelines have been launched final yr in a bid to stamp out the so-known as loyalty penalty — the apply of insurers charging current customers way more for his or her insurance policies than they’d cost new customers for a similar coverage.
This is the primary time that the FCA has taken motion towards an insurer for breaching the brand new guidelines. “Customers do not need to do anything themselves at this stage. Direct Line Group will be contacting affected customers directly,” the regulator mentioned in a press release on Friday.
The FCA mentioned Direct Line had agreed to a “voluntary requirement” to look into the overcharging subject. A voluntary requirement is an settlement between an organization and the regulator to look into a difficulty however stops in need of formal enforcement motion.
Car insurance coverage costs have been growing for all customers prior to now yr, reaching an all-time excessive as rising prices for substitute vehicles, labour and elements push up the quantity that insurers are paying out in claims.
Motorists have been quoted a median of £776 for motor insurance policies within the second quarter, up a file 40 per cent on the earlier yr, in accordance to an index from comparability web site Confused.com and insurance coverage dealer Willis Towers Watson.
https://www.ft.com/content/3dd4acf7-f169-4e37-8ae7-168f1ccbecf1