I would have thought you have a cooling off period. Has the insurance actually started? If not then a small admin fee would be fair enough. As said above the Sky representative is unproffesional in his wording saying that Direct line should be ashamed of themselves. What he should have said was "Unfortunately the information provided to our new customer by his existing insurer was not clear. He should have been made aware that the NCB only applied if he remained with Directline. Given the situation we will cancel the policy and refund the premium minus a reasonable admin fee."

Also if they had quoted on incorrect details then they are equally in the wrong.