Legal reforms are starting to reduce claims frequency but are only one factor in rate cuts, says chief executive
Direct Line Group chief executive Paul Geddes has defended his company’s decision to lower motor rates by 5% in the third quarter, arguing that April’s legal reforms and the firm’s own efforts are reducing claims frequency.
He was also keen to emphasise that Direct Line’s Tracker telematics technology business, which the company is rumoured to be selling to private equity firm Disruptive Capital, is only a part of the company’s telematics offering.
Speaking to Insurance Times following the release of Direct Line Group’s nine-month results today, Geddes noted that Direct Line Group’s 5% year-on-year motor rate reduction compared favourably with the industry-wide falls of between 12% and 14% suggested by pricing surveys.
He said: “This is not us chasing market share. This is us pricing as competitively as we can while being consistent with our value objectives and claims experience. It is discipline.”
He added: “The market price changes are down to the decisions of my competitors and I have no influence on what those choices are.”
Geddes said one driver of his firm’s rate cuts was reductions in claims frequency caused by the legal reforms introduced in April, such as the Legal Aid, Sentencing and Punishment of Offenders Act.
He said: “The fact that the customers end up with some benefits of those changes is what was intended by those changes and is a positive thing.”
However, he added that the legal reforms were only one part of the justification for the rate cuts. The other is the work Direct Line Group has done to improve claims efficiency. He said the legal reforms themselves were not enough to justify the rate reductions seen elsewhere.
“It is certainly not 12% or 14% worth of pricing reduction because this is only one of the perils and it is only down a bit.
“We are not getting ahead of ourselves and it is only a component of why we are reducing rates.”
Geddes declined to comment on whether the Tracker telematics business was being sold to Disruptive, run by entrepreneur Edmund Truell.
However, he insisted that Tracker was only one part of Direct Line Group’s telematics offering.
“We source the black boxes and installation from Tracker, but the telematics value chain includes more than that. We partner with other people, for example, on the data and the [smartphone] app,” he said.
In its results announcement, Direct Line Group said it was making progress in the telematics market, and is installing 400 telematics devices each week. It said one in five new policies sold to drivers under 25 includes telematics.
The statement said: “The group believes telematics will become increasingly important in the UK motor market.”