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Direct Line, one of the UK’s biggest motor insurers, will sell direct to customers from its inception by bringing its signature brand to price comparison websites for the first time.
The insurer is becoming one of the latest big names to bow to the growing dominance of websites in the UK market, where 90 per cent of customers buy new policies, according to Direct Line chief executive Adam Winslow.
Winslow launched his first strategic review on Wednesday, telling reporters he wants to give customers more choice in which channels they use to interact with the business.
He added that the company had previously been guilty of “over-reliance on direct [sales]compared to understanding the dominance, if you will, of the PCW channel’.
Direct Line disrupted the insurance market when it launched in 1985 by cutting out brokers and selling directly to customers, symbolized by the red telephone used in marketing campaigns.
However, the 2000s saw a further overhaul of the market as price comparison websites in well-known advertisements featuring meerkats and opera singers created an easy way for customers to compare different carriers.
The insurer already has some brands such as Privilege and Churchill on the online price comparison sites, but moving its flagship Direct Line brand to the site is a significant move for the company. The company does not disclose the breakdown of revenue between channels. Winslow said this meant Direct Line would “shake up the motor insurance market once again”.
Paul De’Ath, head of market research at consultancy Oxbow Partners, said it was a “big moment” for the sector.
“Not putting yourself in the window limits your ability to reach customers,” he said. “This is pretty much the last big brand to admit it [price comparison websites] have market dominance.”
The announcement was part of a wider strategy reset in which Direct Line said it would focus on its core lines of motor, home and commercial insurance, as well as breakdown services, and exit or stop investing in other areas such as pets and travel. insurance.
Direct Line is trying to rebuild its valuation after shaking off a takeover attempt by Belgian rival Ageas earlier this year. The group said it planned to restore regular dividends and pay out about 60 percent of operating profits after tax, saying this would first be considered in first-half results.
The company said earlier this year that its motor insurance operations had “turned upside down” after a post-pandemic surge in claims costs led to a series of profit warnings and the departure of its chief executive.
The group later admitted it had not responded with enough price increases to reflect this inflation and was pushing up premiums to repair its underwriting books. But it still posted an operating loss of £190m last year as policies taken out at lower prices continued to eat into its profits.
At its full-year results in March, Winslow set a new target of £100m of annual cost savings from areas such as marketing. He said on Wednesday that the group had not announced immediate job cuts but would likely need “fewer resources”, including staff, as the company becomes more digital over time.
Analysts at Barclays said they were “somewhat concerned that Direct Line’s service-focused offering may ‘struggle to stay ahead'” of the comparison-price market, but added that the move could help reduce marketing costs and streamline the group’s operations. .
Analysts at Citi said “today’s incremental news is negative,” citing expected revenue reductions from exiting businesses and other factors.
Shares in Direct Line fell slightly to 192.5p in morning trading on Wednesday and are still slightly lower than Ageas’ second offer of 237p a share, which valued the motor insurer at £3.2bn.
Ageas decided in March not to proceed with its takeover bid, saying it could not justify significantly improving its preliminary offer in cash and shares.