Direct Line Group agrees to business review after overcharging customers in FCA first

Direct Line Group (DLG) customers are in line to receive a refund of around £30m as the insurer said it would review instances where home and motor consumers have been overcharged in a regulatory first.

In a statement released today (1 September 2023), the insurer said an “error” in its implementation of the FCA’s general insurance pricing reform meant its “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,” the insurer added.

Introduced in January 2022, the FCA’s reform aimed to protect consumers by abolishing price walking, preventing insurers from offering cheaper policies to new customers while increasing prices for existing policyholders.

In its own statement today, the watchdog said that DLG had agreed to a voluntary review and that this was the first time one had been agreed with a firm over the general insurance pricing reform.

“DLG will carry out a review to identify all instances where a customer has been overcharged and provide appropriate redress,” the FCA said.

“Customers do not need to do anything themselves at this stage. DLG will be contacting affected customers directly.”

Redress

DLG said this was unconnected to the announcement made earlier this year (29 June 2023) in relation to the past business review of motor total loss claims.

In relation to today’s update, DLG said that redress will be paid to any affected policyholder.

”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.

DLG saw its profits nosedive in 2022 after it was hit by the highest level of claims from major weather events since it listed a decade ago.

In a trading update earlier this year (14 March 2023), the insurer revealed its full year underlying gross written premiums (GWP) fell 3.2% to £2.97bn last year.

Of this GWP, £2.09bn was generated via own brand policies, although premium from this sector fell 5.5% year-on-year.

This came after DLG confirmed that former chief executive Penny James had agreed with the insurer’s board to step down in January.

Earlier this week (30 August 2023), DLG confirmed that Aviva’s Adam Winslow will become its new top boss in 2024.

Danuta Gray, chair of DLG, said: “The board is delighted to announce that Adam Winslow is to be our new chief executive.

“Adam has deep expertise in the UK general insurance market and significant leadership experience, spanning two decades across personal and commercial lines insurance.”