Direct Line is urging trade and industry secretary Stephen Byers to reconsider legislation to outlaw the practice of bundling home insurance and mortgages.

The insurer claims that most MPs agree with its campaign.

Byers shelved plans to implement a ban last December, because there were comparatively few lenders who forced customers to buy the two products together.

However, Direct Line points out that there are still 13 lenders that use the sales practice, which affects more than half a million customers.

It claims that arranging insurance through a mortgage provider can cost customers up to 30% more, because of hidden commissions. This adds up to £400m in annual commissions for mortgage lenders and can mean home buyers pay almost £4,000 more for home insurance during their lifetimes.

Direct Line recently commissioned research which showed that just over half of MPs (56%) “strongly agreed” with the need to ban the the practice of tying home insurance to mortgages. The poll, carried out by Mori, found that a further 29% “tended to agree”.

Direct Line's home business manager Malcolm Cooper said: “Market practices are being allowed to continue against the interests of the consumer and we will be urging each of the main political parties to pledge to deal with this issue at the next legislative opportunity.”

A spokesman said that the Department of Trade and Industry (DTI) had decided to shelve the legislation because it found that many lenders had already responded to consumers' concern about having to buy insurance from their mortgate provider.

“At first there were 34 lenders doing this, and that number has significantly decreased,” he said.

The DTI estimated that less than 5% of home insurance deals were now tied to a mortgage.

The British Insurance Brokers' Association (Biba) has been lobbying for a change in the law to stop bundling for the past three years.

But Biba chief executive Mike Williams said the government was always going to lean in mortgage lenders' favour.

“The government has worked closely with mortgage lenders to encourage the sale of mortgage payment protection insurance,” he said, highlighting the close links between the two.

However, when it came to home insurance, he said “there are people being ripped off who would get a better deal from brokers”.

The Direct Line research also showed that 65% of MPs believed that some mortgage providers required consumers to purchase buildings insurance from them as a condition of mortgage deals. Labour MPs were more likely to agree with a ban on bundling than Conservatives.