Australian-owned insurer IAG estimates it will have to pay out up to $3.48 million to customers after it miscalculated their insurance policies.
The country's largest insurer reached a settlement with the Commerce Commission over potential breaches to the Fair Trading Act which affected more than 150,000 policies.
The problem relates to house and contents insurance policies with the State, Lantern, Corporate Partners and NZI brands.
In some cases the policies affected date back to the 1980s and relate to a sum-insured which should have been automatically adjusted each year to reflect rising inflation.
But the adjustments were incorrectly set below the rate of inflation for much of the period meaning some people were insured for less than they should be.
IAG's head of strategy and risk, Martin Hunter, says many of those customers have had claims settled but there still are some to work through.
Of the 643 claims for miscalculations, so far 538 claims have been reviewed and 198 of those claims received additional payouts, including interest, of $1.35 million.
Another $600,000 is allocated for the review of a further 105 historic claims.
And IAG is expecting to pay up to $1.5 million to another 130 current claims based on the new calculation.
