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UK insurer Direct Line to rein in costs as competition intensifies

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By Reuters
UK insurer Direct Line to rein in costs as competition intensifies
FILE PHOTO: A photo illustration shows insurance renewal notices from Direct Line in London October 10, 2012. REUTERS/Suzanne Plunkett   -   Copyright  Suzanne Plunkett(Reuters)

(Reuters) – Direct Line Insurance Group Plc <DLGD.L> on Wednesday laid out a plan to cut expenses and bolster digital presence, as Britain’s biggest motor insurer set new medium-term targets following a period of stagnant prices and stinging competition.

The plans, under Penny James who took on the top job this year, follow a 2.3% fall in number of policies in force to 14,837 for the three months ended Sept. 30.

That underlined the company’s struggles to keep up with competitive pricing offered by smaller rivals, although gross written premiums saw a modest 0.4% rise to 858 million pounds ($1.11 billion).

The owner of Churchill and Privilege brands looks to slash its capital spend to less than 100 million pounds from fiscal year ending on Dec. 31, 2021 compared with the 175 million pounds expected for the current year.

Direct Line also aims to cut its operating expenses before amortisation and depreciation to below 590 million pounds by 2021 from 722 million pounds in the last year.

It said in a statement it would incur restructuring and other one-off costs of about 60 million pounds in 2019 and 2020 due to the new goals.

“We expect to achieve this (target) through a combination of automation and process improvement, self-service and digitalisation, lowering our cost of change and improving organisational agility,” Direct Line said.

The proposals come as the industry faces lower cost motor insurance policies, Britain’s plans to change the discount rate used to calculate a certain compensation, as well as a regulatory clampdown on prices.

(Reporting by Muvija M in Bengaluru; Editing by Rashmi Aich)