The Financial Conduct Authority (FCA) said that firms would look again at cases in 2012 and 2013 where claimants could have been treated unfairly.
A BBC investigation in June highlighted concerns over PPI compensation.
One expert, commissioned by the BBC, estimated that underpayments could have hit £1bn.
Payment protection insurance (PPI) was designed to cover repayments, in the event of redundancy or ill-health, but was widely mis-sold.
A huge programme of compensation was set up, with financial firms now having handled more than 13 million complaints since 2007.
The latest figures show that £390m was paid out in compensation in June, taking the total amount of redress in three years to £16bn.
The 2.5 million cases are now being reopened because the FCA noticed a sudden dip in the number of complaints being upheld and leading to compensation.
"Making sure anybody previously mis-sold PPI is treated fairly now, and paid redress where its due, is an important step in rebuilding trust in financial institutions," said Martin Wheatley, chief executive at the FCA.
"Given the enormity of this exercise, it is no surprise that there have been some issues along the way, but our approach is delivering a good result for consumers."
He said that there had been an improvement in complaint handling by financial firms.
Seven out of 10 claims of mis-selling of PPI have been upheld in the customer's favour.
About 3.2 million letters have been sent to people believed to have been mis-sold PPI but who have not submitted a compensation claim, with another two million still to be sent out.
The FCA expects work in this area to be scaled down in during 2015, if financial firms continue to improve their complaint handling procedures. Individual bank's complaints figures suggest that the number of complaints about PPI are starting to slow.
A spokesman for the British Bankers' Association, which represents the UK banks, said: "The banks are committed to ensuring that where customers were mis-sold PPI they receive the full compensation that they are entitled to. We are pleased that the regulator believes the redress process is working well.
"The industry will continue to work with the FCA and the Ombudsman to maintain a good standard of complaints handling and get the right result for the customer."
Banks and card companies will reopen 2.5 million PPI mis-selling complaints amid claims of underpayment and rejection of compensation.