The UK's second-biggest insurer blamed the error on an incorrect implementation of the new Financial Conduct Authority (FCA) rules which stop insurers offering better deals to new customers compared to those offered to existing customers who renew.
It's the first time a firm has voluntarily agreed to take this action after the ban on the so-called 'loyalty penalty' was introduced in January 2022.
Here, Which? explains what to do if you think you've been affected and how to ensure you are getting the best possible price for your insurance.
Are you owed a refund?
Direct Line Group, which includes the Direct Line, Churchill and Privilege brands, has estimated it needs to pay back a total of £30m to existing customers who were overcharged when renewing car and home insurance since 1 January 2022.
This is when a new regulation came into force which bans car and home insurers from reserving their best deals for new customers.
A spokesperson from Direct Line Group told Which? it doesn't yet know how many customers have been affected but work is underway to identify everyone who was overcharged.
If you think you paid more than you should, the firm says not to contact it at this stage. It will be in touch with an apology and the money will be refunded 'as quickly as possible'.
Which? asked Direct Line Group what it is doing to ensure this doesn't happen to customers again in future, but it was unable to provide further details.
Direct Line Group had its knuckles wrapped by the FCA in June, when the company was forced to go back through five years of motor insurance claims after admitting it underpaid some customers who had their cars and vans written off. The FCA ordered the company to review the claims after an investigation into the market.
In our last review of the car insurance market, Direct Line earned our Which? Recommended Provider endorsement - based on high levels of cover and positive feedback from customers who had claimed. We've considered our endorsement in light of this issue and our recommendation stands.
Find out more:'Shocking' price of loyalty
The FCA's loyalty penalty ban doesn't set or cap the level of premium charged and Direct Line Group told us the majority of its customers who saw an increase in their premiums this year will be unaffected by its breach of the rules.
Direct Line Group's mistake has therefore added further fuel to the fire for a group of consumers already feeling the squeeze.
Sam Richardson, deputy editor of Which? Money, says: 'It's shocking that customers are being hit by extra, unnecessary costs, just for being loyal to their insurer. 'The regulator should act quickly to identify and punish insurers charging existing customers more than if they were new.'The FCA's new consumer duty will also put pressure on insurers to demonstrate the products they are selling offer fair value. Find out more:How to get the best price on your insurance
The best way to avoid paying more than you should for insurance is to shop around.
Price comparison sites such as Compare the Market, Confused.com, GoCompare and MoneySuperMarket allow you to view multiple car insurance quotes at a glance. Just remember, not all insurers are on price comparison websites, and you may also want to get quotes directly from companies that aren't listed.
Cashback sites – such as Quidco and TopCashback – can also help you get cheaper cover. They work by paying you a cash reward when you click through from them to buy goods or financial products.
These are worth checking out while you shop around for deals, but they won't necessarily offer you the best-value deals, even with cashback included. A £300 insurance policy with £75 cashback is far from a bargain if you can get the same cover elsewhere for £150.
Renewing early and opting for an annual policy instead of monthly could also save you hundreds of pounds. Keeping your mileage in check keeps the cost of cover down and, surprisingly, your occupation can also impact the price. One trick to potentially reduce your price – without lying – is to try and tweak your job title. For example, instead of 'barber', try saying 'hairdresser' or 'hair stylist'. However, if you're dishonest - for example, saying you're a teacher when you're a chef - you risk having your policy voided and any claims declined.
Finally, if you don't want to switch to another insurer, you might be able to get the price down by haggling. We surveyed 14,408 Which? members who renewed or switched car or home insurers between May 2021 and June 2022. Of the members who discussed their premium with their insurer, 48% were able to get their price reduced.
Find out more:How to complain about insurance
If you think your insurer has treated you unfairly or has broken any rules, it may be possible to make a complaint.
Find out more:Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative of the following: 1. Inspop.com Ltd for the introduction of non-investment motor, home, travel, pet, van and temporary insurance products (FRN 610689). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd. 2. LifeSearch Partners Limited (FRN 656479), for the introduction of Pure Protection Contracts, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts. LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386. 3.Which? are an Introducer Appointer Representative of Optimise Media Limited (FRN 313408), for the introduction of HSBC Group, who are authorised and regulated by the Financial Conduct Authority to provide credit brokering activity. Optimise Media is registered in England and Wales to Exchange Street Buildings, 35-37 Exchange Street, Norwich, England, NR2 1DP and company number 04455319. We do not make, nor do we seek to make, any recommendations on financial products or services that are regulated by the FCA, as we’re not regulated or authorised by the FCA to advise you in this way. In some cases, however, we have included links to regulated brands or providers with whom we have a commercial relationship and, if you choose to, you can buy a product from our commercial partners. If you go ahead and buy a product using our link, we will receive a commission to help fund our not-for-profit mission and our campaigns work as a champion for the UK consumer.
source https://www.which.co.uk/news/article/direct-line-group-overcharged-some-car-and-home-insurance-customers-are-you-owed-a-refund-aS4CP5h5eFAf