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Are you owed a refund for cancelled car insurance?

Are you owed a refund for cancelled car insurance?

Category: Car insurance

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

No-one likes paying for car insurance, but what if you found out you've paid more than you needed to? It's recently been discovered that a lot of car insurance customers who cancelled their policies could be in-line for a refund, after a system glitch was discovered that meant people were returned the incorrect amount of money.

What happened?

Usually, if you cancel a car insurance or breakdown policy mid-term, you're entitled to get a return of any premiums you've paid minus the number of days you've been covered (an administration fee will usually be thrown in there too).

However, a calculation error which affected systems of Direct Line and its associated brands meant customers who cancelled mid-term weren't given the correct amount, and are therefore due a refund.

The error was discovered in 2011 and has since been fixed, however it affected cancelled policies between 2005 and 2011 – so a lot of eligible customers could be in for a minor windfall. Direct Line informed the Financial Conduct Authority (FCA) of the miscalculation and has been working with the organisation to ensure consumers are properly refunded.

A spokesman for the insurer said:

"Due to a system error, a number of customers who cancelled their car insurance policy mid-term received incorrect refunds. We are currently contacting affected customers to advise them of the arrangements for refunding the money owed to them."

What insurance firms are involved?

As well as Direct Line itself, its associated brands were affected by the glitch too:

  • Tesco Personal Finance
  • Churchill
  • Virgin
  • Brand Partners
  • Privilege
  • Egg
  • Pearl

How do I know if I'm affected?

If you cancelled a policy with Direct Line or any of the above brands between 2005 and 2011, you could be due a refund. However, those who made a claim on their policy or had a claim made against them won't be eligible for a refund.

What do I need to do?

Ideally, nothing – Direct Line is writing to the affected customers with the final batch due to go out in the next few weeks, and the refund cheque will be sent by post within 10 to 20 days after the initial letter is received.

If you don't receive a letter but think you're entitled to a refund, find your policy documents and associated details and call Direct Line on 0845 246 6315.

How much will I be refunded?

The average payout is around £35, which includes interest at 8% per year (calculated on a pro-rata monthly basis). It won't set the world on fire, but it's always good to get something back from car insurance premiums…

What Next?

Save up to £442.74* by comparing car insurance quotes today

* We reviewed 230,987 quote requests on Quotezone's car insurance comparison service between October and December 2013. We took the cheapest from the median (halfway point) quote returned to each customer to produce a 'representative' saving. 50% + achieved a representative saving of £442.74 or more. The savings you could achieve are dependent on your individual circumstances and how you selected your current insurance supplier.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.