Direct Line takes financial hit from watchdog’s new ‘price walking’ ban
Insurance company Direct Line has said its Q1 performance was “broadly in line with expectations,” after the FCA’s new pricing practice reforms hit its bottom line.
The Bromley based firm said its overall premiums were 2.4 per cent lower in Q1 2022 than in the first quarter of last year, as revenues dropped across its motor, home, and rescue businesses.
The update comes after the UK’s financial watchdog put in place new rules blocking firms from “price walking” in the home and motor insurance markets.
The Financial Conduct Authority’s (FCA’s) new rules ban insurance companies from raising the premiums of loyal customers, due to the belief that those customers are not likely to switch insurers.
In bringing the new rules into force, the FCA said it believes six million customers would have saved £1.2bn in 2018 if price walking reforms had been in place.
The new reforms saw revenues from Direct Line’s Motor segment drop 5.4 per cent and premiums from its Home segment drop 9.9 per cent.
Direct Line noted that higher car prices, as a result supply chain issues in the automobile market, had also hit its business, as payouts increased due to higher car prices and wait times were extended.
The firm also said costs from storms Dudley, Eunice, and Franklin were at the higher end of its estimates, in costing around £40m.