Direct Line to offer legal services

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.