Insurer Direct Line Group has revealed it shed more than 430,000 motor insurance customers after hiking the cost of cover by nearly 40%.
The group’s first quarter trading update revealed a steep year-on-year drop in the number of direct own-brand motor policies, down 434,000 to 3.2 million.
It follows a 35% surge year-on-year in the cost of motor insurance to £599 on average, with existing customers facing a 38% jump to £515.
The group – which was recently the subject of an ill-fated £3.1 billion takeover attempt by Belgian rival Ageas – saw a 1.8% drop in overall in-force policies to 9.3 million in the first quarter of 2024.
Its home insurance division proved less impacted by moves to increase prices, with the number of policies edging only slightly lower to 2.45 million from 2.5 million a year earlier.
This came despite a 27% year-on-year rise in average premiums for new customers and a 13% increase for existing policyholders.
Overall, gross written premiums increased by 10.7% to £892.2 million in the first three months of the year.
Direct Line’s shares fell 2% in Wednesday morning trading after the update, with the stock having come under pressure in recent weeks after suitor Ageas walked away from a possible bid.
Ageas sent an initial proposal to Direct Line on January 19, then improved its potential bid on March 13, but ditched talks in March, claiming it was unable to “engage with” Direct Line’s board.
Direct Line had said the approach was “uncertain, unattractive, and that it significantly undervalues” the firm.
In its latest update, the insurer said it was confident that it can deliver on its aim to cut annual savings by £100 million.
But it said weather-related claims landed it with a bill of around £33 million in the first quarter, of which £24 million was related to weather events.
Chief executive Adam Winslow, said: “We have seen a positive start to 2024 trading, with double-digit gross written premium growth in our motor, home and commercial businesses”.
Direct Line has suffered a turbulent time since the start of 2023, with former boss Penny James stepping down in January last year in the wake of a profit warning and move to scrap its shareholder dividend.
It blamed the impact of freezing weather and the rising cost of motor cover claims.
Direct Line since admitted it under-priced policies for inflation, while the weather costs left the group unusually exposed compared with its rivals.
The group has since been hiking car insurance premium prices to offset the soaring cost of motor repairs.
New boss Mr Winslow is also driving a cost cutting programme, saying in March that savings would come from technology and digitisation initiatives and from simplifying the group’s structure.
The firm did not give details at the time about whether this could lead to job cuts.
Direct Line revealed in its recent full-year results that it returned to profit in 2023.
It reported a pre-tax profit of £277 million last year, up from a loss of £302 million in 2022, driven by the sale of its brokered commercial business.
But its operating loss widened to £190 million from a loss of £6 million in 2022.