The UK’s leading car insurer Direct Line is set to pay more than £200m in half-year dividends in September after enjoying another bumper trading period in the six-months to June 30.

While motorists have seen premiums rise 17.2% in the last year, according to figures published yesterday by the AA, Direct Line made an overall operating profit of £347m with its motor division contributing £169m.

The company, which insures nearly four million motorists, increased its ordinary half-year dividend by 6.5% to 4.9p per share and also declared a special dividend of 10p per share to distribute surplus cash on its balance sheet. Both will be paid to shareholders on September 9 at a total cost of £204m.

Despite insurance industry scaremongering about a fraud pandemic, Direct Line said its motor division “continued to experience stable claims trends on large and small bodily injury”.

The company said higher claims costs were due to “increased repair costs and the benefit to customers of investment in propositions, including guaranteed hire car”. It made no mention at all of fraud affecting its costs or profits.

Tom Jones of Thompsons Solicitors said: "Direct Line's underwriting profit is beyond lucrative by anyone's standards. Motor insurers are taking their customers for a ride, increasing premiums and then using that cash to line their pockets.

"The insurance industry repeatedly says there is a ‘claims crisis’ and talks about high levels of ‘fraud’ to MPs and the media, and yet when it comes to reporting on their finances they make no mention of it. If you follow the money, business for car insurers is booming. There's no crisis except a crisis of greed in the motor insurance industry."