Direct Line calls for new payout formula after profits sting

Insurer Direct Line called for a further shake-up of accident payout laws after profits took a £175 million hit because of a government overhaul of rates.

The firm joined rivals in marking down operating profits — to £403.5 million from £578.6 million — after the Ministry of Justice changed the formula to calculate personal injury payouts.

Direct Line chief executive Paul Geddes hopes a more “appropriate” method emerges from a consultation into the payout rate.

“We’re hoping it’s more appropriate to what claimants actually invest in. We don’t think it should be a negative rate,” he added.

The insurer, best known for its red telephone mascot and ads starring film star Harvey Keitel, said next year’s profits would be protected from the change because of insurance taken out with reinsurers for large claims.

Aside from that, Direct Line boosted premiums by 3.9% to £3.27 billion last year and also inked a deal with Elon Musk’s Tesla to offer insurance to drivers of the hi-tech motor. Geddes said that change to the insuran ce premium tax also created a “shopping market” last year which would continue this year.

“The increase caused people to shop around and they found our brands — this year is going to be another shopping market,” he added.