DIRECT LINE SHEDS 434,000 MOTOR COVER CUSTOMERS AFTER INCREASING PREMIUMS

Direct Line Group has lost over 430,000 motor insurance customers after increasing the cost of cover by nearly 40%.

Its first quarter trading update indicated a significant year-on-year decline in the count of direct own-brand motor policies, which dropped by 434,000 to reach 3.2 million. This comes in the wake of a year-on-year surge in the cost of motor insurance by 35%, averaging £599, with existing customers facing a 38% increase to £515.

Recently, in an unsuccessful £3.1billion takeover attempt, the Belgian competitor Ageas targeted the group. The first quarter of 2024 experienced a dip in the total in-force policies by 1.8%, coming down to 9.3 million.

The home insurance division of Direct Line saw less impact from the price increases, with the policy count slightly decreasing to 2.45 million from 2.5 million the preceding year. New customers faced an average premium rise of 27% year-on-year and a 13% hike for those holding existing policies.

Throughout the first three months of the year, gross written premiums escalated 10.7%, coming in at £892.2million. Direct Line’s shares fell 2% in Wednesday morning trading after the update, with the stock having come under pressure in recent weeks after suitor Ageas walked away from a possible bid.

Ageas initially pitched its proposal to Direct Line on January 19 and then twice bettered its potential bid on March 13. In spite of this, discussions ended in March, with Ageas claiming inability to "engage with" Direct Line's board. Direct Line previously dismissed the takeover bid as "uncertain, unattractive, and that it significantly undervalues" the company.

The insurer has expressed confidence in achieving its goal to slash annual costs by £100million. However, Direct Line faced a £33million hit from weather-related claims in the first quarter, with £24million of this due to specific weather events. Chief Executive Adam Winslow said: "We have seen a positive start to 2024 trading, with double-digit gross written premium growth in our motor, home and commercial businesses".

Since early 2023, Direct Line has experienced a challenging period, marked by the departure of former chief Penny James in January following a profit warning and the decision to axe the dividend for shareholders. The firm attributed its challenges to extreme cold spells and escalating motor insurance claim costs.

Acknowledging that it had set prices too low for inflation, Direct Line found itself more vulnerable than competitors when faced with weather-related expenses. In response, the company has been raising car insurance premiums to counterbalance the rising costs of vehicle repairs.

Mr Winslow is spearheading a cost-reduction strategy, announcing in March that savings would be achieved through tech advancements, digitisation efforts, and streamlining the company's structure. At that time, Direct Line did not specify if this would result in job losses.

Direct Line revealed in its recent full-year results that it returned to profit in 2023. It reported a pre-tax profit of £277million last year, up from a loss of £302million in 2022, driven by the sale of its brokered commercial business. But its operating loss widened to £190million from a loss of £6million in 2022.

2024-05-08T11:48:12Z dg43tfdfdgfd