continuous improvement through factoring in relevant lessons that
are learnt. Participants in the case discussion may wish to compare
and contrast Rover’s approach in the early 1990s with that of other
motor car manufacturers, aiming at both the general market (e.g.
Daewoo’s direct marketing programme) or at specialist market
niches (e.g. Porsche Club).
Case 2.5: Direct Line Insurance Plc
This case was written by Professor Derek Channon, who is a
Professor in the Management School, Imperial College, University
of London.
Abstract
This case describes the development of Direct Line Insurance, from
its beginnings in 1985 until 1992. Over this period the company has
grown to become the largest supplier of private motor insurance in
the UK and a major supplier of household insurance. This was
achieved by creating an insurance company which sold directly to
the public and bypassed the traditional intermediary – the broker. It
achieved this by transforming the cost structure of the industry, by
using direct telephone selling, offering significantly lower prices
based on lower costs, and extensively using information technology
to gain strategic advantage. The case explains the competitive envi-
ronment and outlines how Direct Line’s success was at the expense
of the UK composite insurance underwriters who traditionally sold
their policies through the independent broker. By bypassing the
insurance brokers, Direct Line saved between 25 and 40 per cent of
the premiums written. The success has been imitated by a number
of companies who have adopted a very similar approach.
Learning points
The case illustrates how a traditional sleepy and inefficient industry,
private motor insurance, can be transformed through leveraging
information technology and excluding the intermediary. It shows
how an organization that has only been established for a short time
can achieve a market leadership position through creating a supe-
rior value proposition and breaking the traditional ‘rules’ of the
industry.
60 Relationship Marketing