RAC signals big push into car insurance

MOTORING organisation RAC today insisted it would triple the number of members taking out insurance with the business by the end of the year as it accelerates the growth of its financial services arm.

Chief executive Andy Harrison said the group was well on the way to achieving its first year goal of signing up 450,000 policyholders after doubling the initial customer base to 280,000 by December.

The move should be good news for motorists who have seen steady rises in the price of premiums over the past few years. The car insurance market is set to become even more competitive following the signal from Stelios Haji-Ioannou on Monday that he is to enter the car insurance market after signing a commercial deal with Zurich Financial Services. The serial entrepreneur will offer UK motorists insurance online under his Easymoney brand, under which he already offers credit cards.

RAC bought back its rights to sell motor insurance and lend money to its customers from Axa Direct last year in a frantic bid to close the gap on larger rival AA, which already has 1.6m policyholders.

The need for the strategic shift was underlined today by full-year figures from RAC which confirmed that membership of its core roadside business was static last year at 2.2m. The RAC encountered a string of problems at its call centres last year with motorists angry over call handling times.

Harrison nevertheless remained upbeat and said the underlying business, which also includes Auto Windscreens and the BSM driving school, is delivering strong growth. Pre-tax profit for the 12 months to 31 December before one-offs rose 2% to £88.6m ? the top end of analysts' expectations. Total revenues, excluding a disbanded truck parts agreement, rose 8%.

Harrison said: 'The new financial year has started well and I remain confident in our future prospects.' The full-year dividend payout was lifted 6.2% to 25.8p.