Direct Line quits life insurance

18 August 2011 | By Natalie Holt

Direct Line has pulled out of the life insurance market and is no longer accepting new applications for life cover, life cover with critical illness or over 50s life cover.

The firm has offered insurance products from its parent company Royal Bank of Scotland since 1994.

Existing policies will remain in force and existing customers can continue to contact Direct Line about their policy. Out of the 60 staff that worked for Direct Line Life, 37 have taken voluntary redundancy and around 20 will be kept on to manage the existing book of business.

RBS Insurance director of lifestyle Paul Cowman says: “Following a strategic review of Direct Line Life, we identified that it needed considerable investment to improve its infrastructure.

The protection market is challenging and the cost of acquiring new business is expensive

“We explored a number of options to address the future of the business but unfortunately none of them provided a viable solution that would benefit our colleagues, customers and stakeholders.”

London & Country sales director Michael Aldridge says Direct Line’s strategy of not working with comparison sites serves it well for products like car and home insurance but not life cover. He adds: “With life insurance, I cannot imagine many people going to Direct Line when they can go to a comparison site and get it cheaper or get specialist protection advice. The protection market is challenging and the cost of acquiring new business is expensive, so I can see why RBS made this decision.”

Direct Line’s life insurance quotes were often priced higher than other similar products compared with both the advised channel and direct.

Highclere Financial Services partner Alan Lakey says: “If you look at the ever increasing protection gap and you look at the ever decreasing number of protection companies, that suggests there is not enough business going around and there is not enough profit to be made when companies do write protection business.”

If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing