Transforming Direct Line Group

Our ambition is to be Britain’s best retail general insurer. We focus on making it easy, while providing great value, for customers to fulfil more of their insurance needs with us

Financial targets

Return on
tangible equity
Combined operating ratio for ongoing operations
in 2013
Combined operating ratio for Commercial division
in 2014
Gross annual cost savings in 2014
125% – 150%
Maintain risk-based capital coverage consistent with credit rating in the
‘A’ range

We aim to improve our distribution efficiency and effectiveness through a focus on digital capability and customer value

We employ a multi-channel distribution model and look to optimise the mix of these channels for each of our products and brands. This includes selling our products directly via the phone and internet, through the UK’s four largest price comparison websites, and via partners and brokers.

This is a good foundation for us to build on. Our priorities for 2013 and beyond are to improve quote efficiency by developing our digital capability further and using our data and segmentation insight to target our customers better. We aim to increase customer lifetime value through a focus on improving retention and enhanced cross-product propositions that deepen customer relationships. We intend to continue to differentiate our brands to improve how we meet customer needs. For example, Direct Line "Together" rewards customer loyalty in a way that is unique to the sector, with a 10% discount offered on each and every additional Direct Line policy in the customer’s household.

Our strategy in action

Our launch on is one way that we reinforced our multi-brand, multi-channel model. We have given customers even more choice about how they access our Churchill and Privilege brands, as well as our partners, such as Sainsbury’s Bank. Giving customers a variety of access points means they can buy in the way that best suits the level of interaction they need.

2012 Motor in-force policies (thousands) 4,050 2012 Home in-force policies (thousands) 4,239

We aim to leverage our substantial data scale and the investments we have made to deliver leading technical and market pricing

We have been a leading retail general insurer for a long time. This gives us a significant scale advantage in data, with detailed customer level information from 49 million consumer records and eight million claims data points. Using this data more effectively has enabled us to improve profitability through pricing risks more accurately. By continuing to invest in our pricing capabilities we aim to offer our target customers competitive prices, while also continuing to manage value for our shareholders.

We have already enhanced the use of internal and external data, with twice as many risk factors tested as in 2009. We are building a new rating engine with faster links to external data and the real-time deployment of pricing changes. We aim to deliver industry leading technical pricing capabilities that will enable us to calculate the price implied by claims costs more accurately; and superior market pricing that will enable us to offer the right price to our target customers at any given point in time.

Our strategy in action

We understand the importance of price in consumer buying decisions. We therefore use our extensive data resources, such as the Geospatial tool, so that we can offer customers products at prices which accurately reflect their individual circumstances and risks, match their specific needs and offer good value for money.

2012 Motor current year loss ratio 85.4%
Image of people discussing in a meeting
Geospatial tool: Image of Geospatial tool
Image of Geospatial tool

We aim to capitalise on our hard work and the strategic transformation to maintain top quartile claims performance

We have fundamentally redesigned our operating model, systems and processes in Claims, following extensive benchmarking against global best practice. We have launched our new claims system, ClaimCenter, across the majority of Motor and Home, enabling us to increase our claims handling efficiency. We have simpler processes in fewer sites, giving our people more control and giving our customers a better experience.

In Motor, we have put in place new processes to manage bodily injury claims proactively, bringing together legal, medical and insurance experts who are supported with specialist case management software. With the launch of our home estimating tool in April 2012, our Property Insurance Advisers can now use tablet computers to scope jobs accurately, apply our schedule of rates and deploy our revised builder network where required. This both improves customer service and controls claims spend.

In the next few years, we will aim to maintain momentum in our claims transformation programme. This will be extended to other business divisions in the UK, as well as applying lessons learnt to our International division. We expect to see further regulatory change in the coming years; we’ve been lobbying for it and we believe we are well placed to adapt to the changes when they come into effect.

Our strategy in action

For customers, the moment of truth comes when they make a claim. When many parts of the UK experienced severe flooding in 2012, our people were quickly at hand to provide assistance to the homes and businesses affected. Our Property Insurance Advisers assessed property damage, guided customers through the claims process and arranged temporary accommodation and cash advances to help with essential purchases where needed.

2012 Number of claims registered on new system 418,100

We aim to deliver on our cost saving target and continue to manage our expense base closely

We recognise the ongoing imperative to improve our expense position in this competitive market. In August 2012, we announced a target of £100 million gross annual cost savings in 2014.
We have already taken steps to deliver the majority of the programme, including announcing the closure of our Teesside office as well as a reorganisation of the Executive team and the reduction of 70 senior leadership roles across the organisation.

The priority for 2013 and beyond is to deliver our cost saving programme while continuing to review the way we do business. We believe that making changes to our systems represents an important way of enhancing efficiency, while helping our people control the way services are provided to customers. We have signed a five-year contract with Capgemini to design, deliver and run our new IT infrastructure.

Our strategy in action

Having reviewed our cost base, we have made some fundamental changes to our organisation. We aim to continually operate at the most efficient levels, while maintaining excellent customer service. This means not just looking at the number of people and offices we need, but also challenging ourselves to reduce complexity and deliver better value to our customers and shareholders.

2012 number of sites 16


We have refocused our Commercial business to target the growing SME and micro segments, and are increasingly set to benefit as these customers move towards direct and e-trading distribution channels

We have successfully grown Direct Line for Business in these segments; it now represents 13% of our Commercial gross written premium having launched in 2007.

We have recently made a major investment in technology in our Commercial division, when we launched ‘TheHub’. This is NIG’s new, easy-to-use, full-cycle eTrading platform which is designed to capture the shift in broker distribution towards a high-volume low-cost model suitable for small business customers.

Having returned the business to operating profit in 2012, we are targeting a combined operating ratio below 100% for the Commercial division in 2014. We aim to improve our loss ratio by managing our top-line growth and by enhancing our pricing sophistication through leveraging the Group’s proprietary data. We have put in place robust plans to cut costs and deliver a better model for brokers, customers and shareholders.

2012 Commercial combined operating ratio 108.2%


We have 10 years of experience in Europe’s two biggest motor insurance markets and are now getting to scale and profitability

In Italy, we are the leading direct motor insurer with one million policies, and are focusing on disciplined profit growth through targeted segmentation and cost initiatives. Our German business is number three in the direct motor market with around half a million policies and is targeting accelerated growth through price comparison websites and brand partnerships.

We are well positioned in these two markets that are gradually moving towards direct channels, and we have experienced local management teams in place to adapt to changes in the trading environment. Across both countries, we plan to improve operational efficiency and to leverage our UK expertise in pricing and claims systems.

2012 International in-force policies (thousands) 1,462
Map of where we operate
International promotional campaigns: German adverts on a car in airport
Italian adverts on a car