Norwich Union error leads to refunds for policyholders

Norwich Union, the UK's largest insurer, admitted yesterday that it had overcharged some 70,000 of its unit-linked policyholders, agreeing to immediately refund the fees into its clients' accounts.

Norwich Union, the UK's largest insurer, admitted yesterday that it had overcharged some 70,000 of its unit-linked policyholders, agreeing to immediately refund the fees into its clients' accounts.

The insurer said it had failed to disclose the full extent of its charges for several of its unit-linked funds, levying higher fees than were stated in its policy documents. About 500 of Norwich Union's 2,700 unit-linked funds were affected by the error.

An average of £90 - costing the insurer a total of more than £6m - will be refunded to its customers, paid directly into their policies.

The insurer - which is controlled by Aviva and its chief executive Richard Harvey - said that while its clients had been correctly informed about their funds' annual management charges, several other fees - which are included in the funds' total expense ratio - were not disclosed in its terms and conditions.

The insurer added that policyholders who had recently left the fund, but were affected by the administrative error, will qualify for the rebates, and will be sent a cheque. For new customers investing in the funds, the insurer said it will absorb the additional charges until the end of the year, when it launches a range of products.

James Evans, a Norwich Union spokesman, said the insurer discovered the error itself. "We actually did a review off our own back in October, and we discovered it then. The charges were correctly applied to the policies, but we discovered that in some cases, the additional charges that make up the total expense ratio were not disclosed. We've been in discussions with the regulator, and have kept them up to date on this. And they're very happy with our position."

He added: "We did not have to refund this - but we think it's the right thing to do. It's all about trust. It was an oversight on our behalf and we believe it was only fair that we put it right."

Norwich Union said customers should not contact it about the error. It said it will write to affected policyholders over the next three months, informing them about the mistake and the subsequent uplift to their policy value.