Direct Line insurance group, which is a major employer in Glasgow, is continuing to struggle in the key motor sector leaving staff and investors facing uncertainty.
The group revealed the number of motor policies in force under its own brands fell by 138,000 in the latest quarter to 3.235 million.
Analysts noted the latest fall meant Direct Line had seen 434,000 own brand motor customers walk out the door since March 31 last year.
The group’s brands include Direct Line, Churchill, Darwin and Privilege. It also sells policies in a partnership with Motability.
The fall in own brand customer numbers continues a trend that has been evident for some time. However, directors will be concerned that the number of motor customer losses increased in the latest quarter, from 68,000 in the preceding period.
Direct Line appears to be paying the price for being too slow to increase premiums in response to the surge in inflation. This resulted in the cost of claims spiralling.
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In March last year then chief executive Jon Greenwood said the company had not navigated the substantial headwinds caused by high inflation and regulatory reforms as effectively as it would have wished.
In the latest quarter average own brand motor premiums were £541 up 35% on the first three months of last year.
A report by the Association of British Insurers last month found “motor premiums increased by just 1% in the first quarter of 2024, indicating an easing of rises seen in 2023”.
The trade body said 2023 was a difficult year for motor insurance margins following the surge in inflation. It cited estimates by accountancy giant EY that for every £1 collected in premiums, the industry paid out £1.14 in claims and expenses.
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Firms that moved faster in response to cost increases than Direct Line appear to have done better.
Admiral Group maintained motor insurance policy numbers at 4.94m last year.
In March Admiral said it had increased premium rates amid the spike in inflation knowing this could cost it customers.
“As the rest of the market followed by increasing their premiums, our competitiveness and our retention improved and in the second half of the year we reversed our loss of policies in UK Motor,” the group noted.
In March Direct Line launched a £100m cost saving drive after facing bid interest from Belgium’s Ageas, which directors said undervalued the group.
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The cost cutting may have worrying implications for the group’s 1,000-strong workforce in Scotland. Most employees in Scotland are based in Direct Line House on Glasgow’s Cadogan Street.
Direct Line scrapped its final dividend for 2022 in January last year. New chief executive Adam Winslow has said the group will provide an update on its strategy and dividend policy in July.
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