The Direct Line Group will apply for alternative
business structure (ABS) status this year in a bid to “improve efficiencies relating to legal expenses”.
The intention is
disclosed in the IPO prospectus produced in preparation for the insurance giant’s
forthcoming stock market flotation.
In a masterpiece
of impenetrable management-speak, a spokesperson for Direct Line Group said “In light of possible regulatory changes to
remove dysfunctionality from the UK motor insurance market, which we support,
we’re looking at a variety of options including legal services to ensure we’re
able to sustain our competitiveness and continue to offer customers choice, and
great value and service.” So what
does that actually mean? It seems that
Direct Line has earned £110 million in solicitor referral fees over the past
three and a half years – a valuable revenue source which will cease once the
referral fee ban comes in to force in April 2013 as a consequence of civil
justice reforms aimed at reducing fraudulent insurance claims. Not surprisingly,
Direct Line is looking at ways of filling the hole, and it seems that having
its own legal capability in house may be the answer.
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