Direct Line has agreed to pay redress to policyholders after overcharging them by about £30m because of an error in the calculation of new insurance rules.

The group said it would undertake a “past business review” relating to pricing in its motor and home insurance business after new regulations were brought in from the start of last year.

“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,” the firm said in a statement.

“As a result, those customers have paid a renewal price higher than they should have.”

City watchdog the Financial Conduct Authority said the firm will carry out a review to identify “all instances where a customer has been overcharged, and provide appropriate redress”.