The York-based group, which last year was hit by a £10.5 million fine for "widespread'' mis-selling, hiked provisions for compensation and associated costs to £51.7 million from £33.4 million.
Embattled credit card insurer CPP Group has revealed a soaring bill to compensate customers mis-sold policies as it offloaded its US arm to buy vital breathing space.
CPP, which employs about 1,400 staff, also warned of another round of cost cuts but declined to say if jobs will go. It is selling its profitable US business to AMT Warranty for £26.1 million under survival plans which have bought it about five months' grace from its lenders.
The company, founded more than 30 years ago by entrepreneur Hamish Ogston, sells products such as wallet and card protection through banks and building societies.
It was brought to its knees by a mis-selling scandal between 2005 and 2011, during which it sold 4.4 million policies and renewed almost 19 million.
The Financial Services Authority last year slammed it for treating customers unfairly, selling them insurance they did not need, automatically renewing policies and exaggerating the risks of not taking out its insurance.
That prompted speculation CPP's banking partners - which include Santander, Royal Bank of Scotland, Yorkshire Bank and HSBC - could also be on the hook for compensation.
The company said it plans to compensate customers through a supervised scheme of arrangement, but would only be responsible for payouts to customers it sold to directly, meaning lenders would also have to fork out.
Of the 4.4 million policies, it is believed only about 300,000 were sold directly by CPP while lenders were responsible for 4.1 million. CPP added it expects fewer than one in four of potential claimants to succeed with a compensation bid.
It has already spent £17.8 million of the provision pot and warned the total compensation bill will not be known until at least the end of 2014.