Direct Line moots ABS move as means of improving legal expenses

Direct Line Group is planning to apply for alternative business structure (ABS) status later this year in a bid to “improve efficiencies relating to legal expenses”.

The insurer, whose planned float will be one of the biggest IPOs of the year (14 September 2012), stated its intentions to apply to become an ABS later this year in its IPO prospectus.

The document stated: “In early 2012, the Solicitors Regulation Authority began to license ‘alternative business structures’ as permitted under Part 5 of the Legal Services Act 2007. The statute permits non-lawyers to own and invest in companies that provide legal services. The group is currently considering participating in an alternative business structure as a potential measure to improve efficiencies relating to legal expenses, and currently expects to make the relevant application under the Legal Services Act in the second half of 2012 as part of this process.”

A spokesperson for Direct Line Group added: “In light of possible regulatory changes to remove dysfunctionality from the UK motor insurance market, which we support, we’re looking at a variety of options including legal services to ensure we’re able to sustain our competitiveness and continue to offer customers choice, and great value and service.”

Earlier this month, the AA applied for a licence to become an ABS, following news that Saga – which merged with the AA in 2007 – has launched a legal services arm for over-50s (3 October 2012).