should ever need assistance in recovering uninsured losses following an
accident that was not their fault, the matter could be pursued through the
Courts on their behalf.
Further, Direct Line made breakdown cover available to motor policy
holders at prices much lower than traditional organizations like the RAC
and AA. The company had also expanded its policy holder base by pur-
chasing the motor book of Refuge Assurance, made up of some 7000 policy
holders. Mr Wood considered this purchase as merely a dry run to test the
risk and return of other insurers’ motor books, because he felt that other
leading composites would be getting rid of their usually unprofitable
motor books.
It was only four days’ new business, in current terms, so I couldn’t get excited
about it ... It occurred to me that we would never take this route again
because it’s easier and better to grow your own business. There are proba-
bly 15 million motorists in the UK who pay for private motor insurance. Of
them, ten million will have over three years’ worth of no-claims bonuses. I
want 30 per cent of that total.In household insurance Direct Line was better able to quantify the effect of
low prices. As a result, Direct Line had been able to guarantee purchase at
lower prices for home insurance compared to those purchasing through
building societies. Direct Line was also able to guarantee that the
company’s premium rate would not increase in the following year. By 1990
Direct Line had achieved cover on £7 billion of property and contents. By
1992 premium income had grown to £35.7 million and the number of poli-
cies in force had grown from 166 000 in 1991 to 206 000.
Direct Line also provided insurance for the Royal Bank of Scotland loan
clients and credit card consumers. The service was in this case provided via
the Royal Bank and covered over 350 000 accounts in 1990, though it was
not as successful as motor or household businesses.
Early in 1993, Direct Line was developing further financial service prod-
ucts to offer on a direct sales basis. Mr Wood commented,
We’re doing a prototype now on home loans and deposits to our cus-
tomers. It should be operational in four or five months’ time. Longer term,
we are looking at mortgages. However, I’ll only give people home loans if
they come through our core products. That really streams out some bad
costs. It’ll be simple – if you want one of our products, you have to have our
home insurance.124 Relationship Marketing