Almost 3,000 people have had their motor insurance revoked after Hastings Direct discovered an underwriting error.
Customers began receiving calls two weeks ago warning that their insurance would be can-celled within seven days as a system programming error meant they were being under-charged on their premiums.
Hastings spokesman Jeffrey Roberts said clients were given the option of a refund, minus the time on cover, or a new policy at an increased cost.
He would not comment on the amount the rewritten premiums would be increased by.
He said: “This is very rare. I’ve never come across this before in my life.
“We have now corrected the fault and are doing everything in our power to urgently contact everyone who’s been affected and offer alternative cover.”
A discussion forum on aggregator site moneysupermarket.com lists the angry responses of more than a dozen people who had their insurance revoked and say they can’t afford the new policy.
The reaction was particularly heated from those who paid for the entire 12-month policy upfront.
Complaints have been made to the Financial Ombudsman Service.