Direct Line and finance union Unifi are at loggerheads after the motor insurer refused to recognise the union.

Unifi claims that Direct Line staff, based at Croydon and Pudsey, have been joining the union "in droves" following Direct Line's takeover of Churchill in June.

An approach was made to Direct Line group chief executive Annette Court in July to introduce collective negotiations for staff, but this approach was rejected, Unifi said.

Unifi chief negotiator Rob MacGregor said: "Unifi is confident that with such a large majority, recognition will be gained through the legal process, but staff members must now be thinking to themselves what is the management trying to hide?"

In response, Court said: "We are now considering the position further."

The row erupted as Direct Line's parent, Royal Bank of Scotland (RBOS), revealed the insurer generated a 30% increase in premium income during the first half of 2003.

Direct Line's performance enabled it to increase its profits contribution to RBOS by 32% to £202m in the first

half of the year. The insurer's combined ratio - a measure of its underwriting performance - dropped slightly to 89.5% from 89.1%.

The personal lines giant's performance was fuelled by the additional 193,000 motor policies written in the period, while the number of UK home insurance policies increased by 60,000. It was also helped by the relatively benign weather in the first half of the year, which helped reduce claims to £836m.

RBOS also confirmed that the Churchill takeover, "is still subject to FSA approval, [and] is expected to be completed by the fourth quarter of 2003".