Report On Direct Line

Contents Page

Introduction 3

Executive Summary 4

Factors explaining the success of Direct Line 5

Market shares and Level of Sales in the Insurance Sector 7

Pest Analysis: 10

SWOT Analysis for Direct Line 13

Conclusion: 16

Bibliography 17

Appendices..................................................................................................................18

Introduction

As analysts of Coopers and Lybrand we have been asked to analyse the Financial Services Industry. We have been asked to analyse and research the Insurance sector focusing on the Direct Line PLC as an example of one of the leading players in this particular sector.

In this report we aim to:

* Establish the factors that explain the success of Direct Line.

* Establish market shares and level of shares

* Main external factors that make an impact on the Insurance sector.

* SWOT analysis of Direct Line.

Insurance companies have had a quite a tough time across most sectors in the recent past, although the performance of the domestic motor and property insurance sectors has improved over the last few years as claims rates have settled and premiums have gradually increased. However, price competition in certain areas is now threatening to create a softening in the market and will mean worsening operating ratios.

The general insurance industry has also faced a new set of challenges from January 2005 onwards with the Financial Services Authority (FSA) taking over the regulation of the market. This means that there will be new rules and regulations that they are not used to and will have to adjust to the new authority. All companies and broker operations are now obliged to register with the FSA. The arrival of General Insurance Day was predicted to strengthen the bond among brokers but this has not really been the case so far. Insurers have been concerned about the rising cost of compliance, although the changeover to the FSA has been fairly faultless to date.

Executive Summary

In this report we have conducted an analysis of the firm direct line insurance. We have assessed its current position in the market and have analysed both industry conditions and economic conditions we have made recommendations to the firm which should help the firm keep its current position in the market.

Methodology:

This report will be conducted by extensive research on the background of direct line insurance also the industry of insurers will be analysed in depth. We will look at both PEST and SWOT analysis to make recommendations to direct line on how they will be able to sustain market share.

Recommendations:

If the company wishes to succeed in the future it will need to compete more effectively with strong firms such as Royal sun alliance group to stay on top they will need to be more efficient in order to sustain market share. Direct line will need to concentrate on marketing to keep their position in the market. They will need to advertise more intensively to beat competition this can be done by direct mail, television and newspapers. Direct line should differentiate itself from the other RBS insurance operations, and continue its focus on pure telephone and internet sales as this has proved successful till now. It can try new types insurance however should stay loyal to it main profiteers which are home, motor, rescue, travel and pet insurance. They should maintain and improve their online business as it dominates market share at 50%.

Factors explaining the success of Direct Line

There are many factors that explain the success of Direct Line. In less than two decades they have built an organisation of over 9,000 employees offering different products to more than five billion customers across the United Kingdom and Europe.

On the first day as a company - 2nd April 1985 - Direct Line became the first UK insurance company to use the telephone as its main channel of communication.

It was a revolutionary event. Out went the middlemen, the fat commissions, the forms and the jargon. In came speed, simplicity and a common-sense human touch.

But the revolution didn't end there. Next came claims by phone... then the launch of home, travel and pet insurance, loans, mortgages and pensions... and the list goes on, which brings me on to my first point on the successes of Direct Line.

A reason that Direct Line is so successful is that they expanded their products, they did not just conform to one type of insurance, and they have a different variety of insurance that will satisfy a variety of customer's needs. This will broaden their market allowing them to have a wider scope of customers and it will also make their name brand well known as they have different products that no other insurance company.

Another reason they are so successful is that they have branches of their company in other locations besides the United Kingdom; they have it Europe as well. This is good, because they are making their company well known and it will also generate extra profit from other places as well.

By 1995, the red telephone was trading in Spain under the name, LнneaDirecta Aseguradora. Three years later, Lнnea Directa had become the country's leading direct motor insurer.

And in 2001, Direct Line was making waves in the German and Italian motor insurance markets by acquiring the motor insurance businesses of the American insurer, Allstate. They have made themselves known in major countries.

An internal factor as to why Direct Line is so successful is their Information Technology. The interactive parts of the website allow customers to gain a huge advantage from the Internet.

From analysing the website there are many advantages