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Direct Line hits £125m from solicitors since 2009 after scooping final £6m in referral fees


Income: Direct Line expects civil justice reforms to have positive effect longer term

Direct Line Group – which last month announced plans to launch its own legal business [2] – made a final £6.1m in referral fees from solicitors this year before the ban was introduced on 1 April, its half-year results have shown.

It means that since the start of 2009 the insurer has received £125m from solicitors in referral fees, according to figures it published last year when it floated, and also banked tens of millions more in credit hire referral fees – £8.1m in the first half of 2013 and £17.5m in 2012 alone.

The 2013 half-year report said that recent trends supported the group’s view that taken as a whole April’s civil justice reforms – the referral fee ban, 10% uplift in general damages, end of recoverability of additional liabilities and reduced RTA portal fee – “are expected to be broadly neutral to operating profit in 2013 for the group”.

But with the extended portals that came into being last week – together with the possible reforms to whiplash claims next year – the balance will tip, it said: “Overall the group currently expects these reforms to be net positive for the group in the medium term.”

This is expected to result in falling premiums, and the government has said it will be watching closely to see that this happens.

Paul Geddes, CEO of Direct Line Group, said: “The UK motor market remained competitive and dynamic, with significant premium reductions and the introduction of legal reforms. We believe the full effect of the reforms will take time to materialise and their ultimate impact is difficult to predict as it will depend on a change in the behaviour of claimants and lawyers.

“We continued to price based upon our observed claims experience, which was favourable. In the second quarter, this has helped us to reduce premium rates overall about 3% year on year, contributing to a stabilisation of our policy count.”

In response to the transport select committee’s recent report on whiplash, Direct Line backed suggestions for a reduction in the three-year limitation period and said claimants should have to report their claim to insurers within 90 days.

It also supported raising the small claims track limit from £1,000 to £5,000 for RTA personal injury claims, even though the committee was opposed.