Direct Line to cut 550 jobs in turnaround drive

About 550 jobs will be lost at Direct Line as the new boss of the troubled motor and home insurer cuts costs in a battle to revive the business.
The job cuts equate to about 5 per cent of the FTSE 250 company’s roughly 10,000-strong workforce and were disclosed alongside third-quarter figures that showed a shrinking of the group’s customer base as it has pushed up prices.
In-force policies at its continuing operations, which exclude a business it has sold and other non-core units, fell by almost 5 per cent year on year to 8,975,000 in the three months to the end of September. Total gross written premiums and other fees earned by the group also slumped to £705.1 million from almost £1.1 billion a year earlier, with the company claiming the figures were skewed by the way it books premiums from its partnership with Motability.
Still, Adam Winslow, 45, who took charge of the insurer in March, said his turnaround was in the “early stages” and that trading in the period was “not yet fully reflective of the actions we have taken”.
“It takes typically 12 months for activity to earn through,” he added. Asked where in the company jobs would be lost, Winslow said that “we are looking at our whole business end to end”.
Direct Line is one of Britain’s biggest motor insurers but has been thrown into turmoil in recent years after bosses were caught off guard by a spike in the cost of handling claims that was fuelled partly by a big rise in prices of second-hand cars and spare parts. The group failed to lift its prices quickly enough to offset the impact, causing a string of profit warnings between 2022 and 2023 and a drop in its share price. The shelving of its dividend in January last year proved the final straw and Penny James, who was the insurer’s chief executive, abruptly left the business weeks later.
The immediate challenge facing Winslow, who was poached from Aviva, was to defend the business against an unwanted £3.2 billion takeover approach from the Belgian insurer Ageas.
Since fighting off its suitor, he has restored the company’s dividend and set out a plan to overhaul the group, which includes allowing Direct Line’s main brand to feature on price comparison websites for the first time. It also involves finding at least £100 million of cost savings by the end of next year, driving the job losses.
Yet wider conditions in the insurance market could impede a turnaround. Industry data from the Association of British Insurers suggests motor premiums reached their highest level in the first quarter of the year and are now declining. Direct Line said on Monday that “trading conditions were competitive” in motor, prompting analysts at Jefferies, the stockbroker, to caution that “it now appears that the group faces the difficult task of repairing the underwriting quality at a time when pricing has already passed its peak”.
Direct Line also warned that it “experienced a higher level of large bodily injury claims” in the third quarter, which Jefferies told clients was “even more concerning”.
A continuing inquiry by the Financial Conduct Authority into whether consumers are being ripped off by premium finance, a form of credit offered by Direct Line and others that allows customers to pay for insurance in instalments, presents another potential headwind to Winslow’s turnaround efforts.
He said that Direct Line was already obliged under regulations to consider whether such products represented fair value for consumers and had made some changes this year to its premium finance offer. “Ultimately we want to offer a good deal to all of our customers,” Winslow added.
Another looming issue is government scrutiny of the recent jump in car cover prices.
Worries that motor insurance has become unaffordable for some households has led to criticism that some insurers are profiteering from claims inflation, something the industry has denied. Labour had warned before it came to power in July that it would clamp down on rising prices and last month the new government followed through on that pledged by setting up a taskforce to tackle the problem.
Still, Winslow argued yesterday on Monday that government attention in this area “could be very helpful because they’re looking at a lot of the factors that have driven inflation into motor premiums and very few of those can be solved by insurers alone”.
Direct Line shares slid 4½p, or 2.7 per cent, to close at 160½p.