More than 1m holders of mortgage payment protection insurance (MPPI) policies are to receive refunds for premium increases that were unfairly imposed this year.

Under a deal secured by the Financial Services Authority (FSA), MPPI providers will also reverse any cuts to policy benefits from loan insurance imposed since January 1.

The FSA says the action is necessary because the policy changes, which were widely imposed by banks, building society and insurers, were unfair on customers.

MPPI companies have until the end of June 2010 to make contact with their customers and offer them refunds, expected to total about £60m.

Providers have also agreed to freeze premiums and not make any further policy changes until at least the end of the year. Contracts will also be reworded by April 2010 to ensure they are fair to customers.