INSURANCE giant Aviva has admitted it is paying compensation to more than half a million customers following historical errors at its York-based division.

The Aviva Life business, which is predominantly based in York and employs around 2,500 people in the city, has confirmed it is writing to customers as part of a “product governance programme”.

Initiated in 2007, the programme has already paid out around £163 million to 390,000 life insurance customers.

With about 2.5 per cent of its UK customer base receiving compensation, the insurer has said it expects to make payments to a further 390,000 customers. It is likely total payouts could top £300 million. Aviva said funding had been reserved to cover future payments.

The company would not confirm what the historical errors are, though they are believed to relate to incorrect tax rates being used on pension plans and problems with how savings had been invested.

The mistakes relate to personal pension plans, workplace pensions, life insurance cover and savings.

Aviva said it has since “strengthened” processes and controls to prevent “these types of issues” reoccuring.

Since the compensation programme began in 2007, Aviva has shed hundreds of jobs in the York at different intervals over the past seven years, with 600 roles in the Life division being transferred to India last year.

However, the company stressed the job losses were not linked in any way to the historical errors, or making savings to cover compensation payments.

An Aviva spokesperson said: “We believe in doing the right thing for our customers. We regret that these historical mistakes were made. If any error has been made we will put it right.

“Since 2007 we have strengthened our processes and controls to prevent these types of issues happening again. We are working through any outstanding cases systematically and are making good progress. Any customers who may be affected can be confident we will contact them.

“We found the issues, we are fixing them and we are putting them right.”