Thompsons says Direct Line’s position is ‘inconsistent’
The UK’s leading car insurer, which has been one of the most vocal about a crisis in motor insurance due to fraud, today announced a 14% increase in motor profits.
Direct Line, which has led support for a government proposal to remove the rights of those injured in road traffic accidents through an increase in the small claims limit, has also cut its provision for claims by 10%.
Thompsons Solicitors today called its position on fraud ‘inconsistent.’
Direct Line has been vociferous in backing government allegations that fraudulent whiplash claims are costing the car insurance industry £2 billion annually.
However, despite being legally required to disclose ‘material’ risks in its reporting to the stock market and investors, Direct Line makes no mention of fraud in motor claims being an issue in its 2015 annual results published this morning.
“Direct Line is playing a game here and they are taking the public for suckers if they don’t think we can’t see it. It’s inconsistent that if fraud is such a problem it isn’t mentioned in the annual report,” said Tom Jones, head of policy at Thompsons Solicitors.
“Only a few weeks ago Direct Line’s Director of Claims was talking about ‘extreme compensation culture’ and yet these results suggest the company is doing very well and there is no mention of fraud.
“Direct Line is panicking consumers about fraud and has increased premiums by 7.7% and yet it’s reporting substantially increased profits that are being used to finance healthy dividend payments.
“No wonder Direct Line’s share price has gone up more than 20% in the last 10 months – investors know that talk of fraud increases support for measures that will deprive accident victims of funding for legal costs which will boost profits yet further.”
Direct Line’s 2015 results published today show the company:
- Increased its profit from motor insurance by 14% to £338m (2014: £297m)
- Increased in its final dividend payment to shareholders by 4.5%
- Charged 7.7% more for premiums in the final quarter of 2015 than in the same period of 2014
- Reduced the provision in its reserves for motor accident claims by 10%
At the end of the year, Direct Line had 3.7m car insurance policies in force, giving it a market share of nearly 15%. The government’s Autumn Statement put a figure of £2 billion a year on motor fraud. Direct Line’s 15% of that would mean a fraud impact approaching £300m – well above its own ‘materiality’ disclosure figure of £40m. And yet no disclosure has been made.
“Direct Line need to clear up the inconsistency. There either is a fraud crisis, in which case why no mention in the annual report and how come profits are so good, or there isn’t.”
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