Direct Line laid bare the parlous state of motor insurance on Wednesday by highlighting the rise in what it costs to repair a car and sluggish motor insurance premiums.
The FTSE 100 giant said cost inflation — measuring the rising expense of repairing damaged cars — would be at the upper end of a 3% to 5% range.
This is because repair bills Direct Line gets from third-party claims have been higher, with garages charging more because of the higher cost of parts from Europe after the fall in the pound.
At the same time, a price war between insurers — good news for insurance shoppers — has hampered Direct Line’s attempts to grow premiums.
Gross written premiums for motor fell by 4.2% year-on-year to £386.9 million for the three months ending March. Home insurance was more stable, rising 0.6% to £44.6 million.
The company has launched a number of “pricing initiatives”, to win customers without leaving it vulnerable to losses.
Incoming chief executive Penny James said: “The first-quarter was characterised by significant operational progress in a tough trading environment.
The motor market remained highly competitive, with market premiums failing to keep pace with claims inflation.”
