Direct Line price hikes fail to drive away customers

Direct Line customers are already paying higher premiums because of an unexpected change to the way personal injury claims are calculated, it said today.

The sudden change to the Ogden Rate (the rate used by courts to calculate damages), in February caused insurers’ share prices to plummet and played havoc with their full-year results.

Although Direct Line — whose brands include Privilege, Churchill and Green Flag — has raised prices in response to the anticipated increase in claims from motor insurance customers, it has won more commercial business, leading to a 4.2% jump in gross written premiums from £778 million to £810 million in the first three months.

The number of in-force commercial policies rose 5.1% compared with the same time last year.

However, attempts to raise prices in the home insurance business led to lower numbers of new customers signing up, the insurer said. The homes business was also tough because of a rise in claims costs.

Direct Line said it was on course to reduce its commission and expense costs this year.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the slump in new homes business was a “reminder that general insurance is a tough business”.