Britannic Assurance has been hit with a £7m bill thanks to computer hiccups and poor endowment sales practices.
The life office, which has recnently made a push into the IFA market, set the aside the cash in its 1998 reserves.
Some £6m is being handed out to industrial branch customers with 15 year endowment product called the IB table 3 endowment after the FSA rapped Britannic for breaching best advice rules when selling it.
The other £1m has been earmarked to compensate "thousands" of ordinary branch customers affected by a computer glitch which saw with profits units wrongly allocated to pension policies due to "computer and user error".
Britannic Assurance is conducting a review of the 15 year endowments it has sold, concentrating on those which have been surrendered early or which have lapsed.
It has been forced to top up their premiums in some cases. The review should be finished by the end of the year.
The company withdrew the product at one stage but is now selling it again.
The FSA had felt that a 10 year policy, which brings in less commission, would have been "more appropriate" for most customers who are often unaware of the product's inherent risks.
Payouts for the computer error have been termporarily stalled due to lack of IT resources.
Britannic Assurance actuary Michael Strohm says: "The reviews don't necessarily put us in the best light. But they don't cause us too many problems as we are financially sound. I wouldn't be surprised if other companies had the same problem."