Direct Line is hit with £1m bill so far for coronavirus claims at travel arm

Insurer Direct Line Group has said the UK’s recent winter storms are set to cost it at least around £35 million, while it revealed a £1 million bill so far for coronavirus claims in its travel arm.
Fears about the impact of the coronavirus have spread around the world.  (AP Photo Vahid Salemi)Fears about the impact of the coronavirus have spread around the world.  (AP Photo Vahid Salemi)
Fears about the impact of the coronavirus have spread around the world. (AP Photo Vahid Salemi)

It said the outbreak has the potential to impact its travel business results this year, while the disruption in equity markets could knock its investments.

Direct Line said: “Like all businesses, we are subject to the consequences of disruption to financial markets and global supply chains which, over time, could impact the performance of our investments and the cost and speed of fulfilling customers’ claims.”

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Details of the claims hit came as it reported a 12.2% drop in pre-tax profits to £509.7 million for 2019.

Direct Line said the impact of benign weather in 2019 was more than offset by a number of factors, including lower reserve releases.

Penny James, the CEO of Direct Line Group, said: “We have delivered a good set of results, and continued to improve the quality, while navigating a difficult motor market and delivering significant change in the business. Our cost reductions and model of disciplined underwriting helped maintain a combined operating ratio of 92.2%, supported by all our product lines. This helped deliver 2.9% growth in our final dividend to 14.4 pence and I’m pleased to announce the launch of a share buyback of up to £150 million which we expect to complete by the end of July 2020.

“The motor insurance market began to show signs of improvement in the second half of 2019, helping us return to growth while our other major markets were competitive, with pricing largely keeping pace with inflationary cost pressures.

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Direct Line said the recent storms Ciara and Dennis in February have shown how important it is to be with the right insurer.

The company added; “We are proud with how we supported our customers during these difficult times.

“We estimate that the claims costs of these storms will be in the region of £35 million, net of Flood Re recoveries, across our Home and Commercial businesses compared to an expected annual weather cost of around £64 million. It is too early to assess any additional claims from Storm Jorge.

“In addition, the Coronavirus outbreak (specifically the disease COVID-19) has the potential to impact the 2020 result of our travel business.

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“We have travel reinsurance protection to mitigate the cost of an event over a 28 day period to £1 million up to a limit of £10 million. The full coverage, if utilised, can be reinstated once on the same terms. Currently, incurred claims are around £1 million.

There are two regional Direct Line offices in Leeds, on The Headrow and on Neville Street, near to Leeds Station.

The company also has sites including Doncaster, Manchester, Bristol and Ipswich.

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