Direct Line’s Aviva purchase ‘to drive up prices’

Millions of customers face paying more for their car and home insurance if Aviva manages to buy out rival Direct Line, a consumer campaigner has warned.

Aviva surprised the City this week with a £3.3bn bid for the troubled insurer, which rejected the unsolicited offer.

The FTSE 100 insurance giant said the deal would allow Direct Line’s 9 million customers to benefit from its “breadth, scale and financial strength”.

But experts such as James Daley, of consumer campaign group Fairer Finance, worry the takeover will reduce competition and lead to even higher insurance premiums, which have soared in recent years.

Combining Aviva’s 10.6 per cent share of the motor insurance market with Direct Line’s 10.3 per cent, the combined group would easily overtake Admiral, the number one player with 11.3 per cent, according to the uSwitch price comparison website.

Aviva already leads the smaller home insurance market, with Direct Line in third place behind LV=.

The proposed partnership “would be detrimental to the customer as it would reduce competition in the market,” Daley said. ‘Direct Line and Aviva are already two strong players. It would be a loss if Direct Line left the market; it wouldn’t be good for the competition.’

He urged the Competition and Markets Authority to investigate the deal if it goes ahead. The cost of car insurance soared 82 per cent in the past three years after the pandemic lockdown ended, according to the Office for National Statistics.

It now costs an average of £612 a year to insure a vehicle, latest figures from the Association of British Insurers show.

Car insurance is mandatory for drivers, and seven in ten adults say their lifestyle requires owning a vehicle, scoreboard researcher Ipsos found.

It is also a great source of income for the Government.

Budget documents revealed that the insurance premium tax, which covers everything from home and car cover to pets and travel, will raise £55.7 billion by the end of the decade, £3 £.4 billion more than previously thought.

Experts also warn that the scandal engulfing the car finance sector over hidden commissions could spread to insurers such as Aviva and Direct Line, whose customers pay for cover in installments.

Direct Line Actions it shot up 4.6 percent.