The insurer, which is majority-owned by Royal Bank of Scotland, said one of the main reasons for the profits boost was a reduction in claims for bodily injuries in recent years.

This allowed Direct Line to release funds from its reserves as well as make a lower provision for future years based on actuarial predictions that the numbers of claims will continue to fall.

“Here we have yet another example of the facts not tallying with the media campaign being waged by the car insurers,” said Tom Jones, Head of Policy and Public Affairs at Thompsons Solicitors.

“So much for all the cries of compensation culture. Claims are going down and profits are going up. No wonder they could afford to pay out £101m to shareholders in June – two thirds of which went to RBS.”

Direct Line’s half-year results were announced just days after the House of Commons Transport Select Committee published a report calling on car insurers to pass on savings from the reduction in claims to motorists.

The report also said insurance companies should “immediately get their house in order and end practices which encourage fraud and exaggeration” including the practice of paying referral fees to law firms.

However, Direct Line is now setting up its own legal services company to pursue claims for its policyholders – putting it on both sides of the ‘whiplash’ and ‘compensation culture’ fence.

“It’s a case of heads I win, tails you lose,” said Tom Jones. “Direct Line is looking to make money from motorists both by paying out fewer claims and by providing legal services to pursue claims against its competitors.

“It was good to see MPs challenging the narrative pedaled by car insurers that the UK is the ‘whiplash capital of Europe’ and calling on car insurers to pass on savings to policyholders.

“But so far it seems to have fallen on deaf ears. Direct Line’s half year results show yet again how profitable the motor insurance market is. As we said last week, the government should give the car insurers a strict deadline to reduce premiums substantially – or face a windfall tax.”