Millions of customers face paying more for their car and home insurance if Aviva succeeds in buying rival Direct Line, a consumer campaigner has warned.
Aviva stunned the City this week with a £3.3billion offer for the troubled insurer, which rejected the unsolicited swoop.
The FTSE 100 insurance giant said the deal would allow Direct Line’s 9m customers to benefit from its ‘breadth, scale and financial strength’.
But experts such as James Daley, of consumer campaign group Fairer Finance, are concerned the takeover will reduce competition and lead to even higher insurance premiums, which have rocketed in recent years.
Combining Aviva’s 10.6 per cent share of the motor insurance market with Direct Line’s 10.3 per cent would see the combined group easily leapfrog Admiral, the number one player with 11.3 per cent, according to price comparison website uSwitch.
Aviva already leads in the smaller home insurance market, where Direct Line is ranked third behind LV=.
Unsolicited swoop: Aviva stunned the City with a £3.3bn offer for troubled insurer Direct Line
The proposed tie-up ‘would be detrimental to the customer as it would reduce competition in the market’, said Daley. ‘Direct Line and Aviva already are two strong players. It would be a loss if Direct Line left the market – it would not be good for competition.’
He urged the Competition and Markets Authority to investigate the deal if it goes ahead. The cost of car insurance soared by 82 per cent over the last 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 trade body show.
Car insurance is compulsory for drivers, with seven in ten adults saying their lifestyle requires having a vehicle, marker researcher Ipsos found.
It is also a big money-spinner for the Government.
Budget documents revealed that insurance premium tax, which covers everything from home and car cover to pets and travel, is set to raise £55.7billion by the end of the decade – £3.4billion 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 instalments.
Shares in Direct Line soared 4.6 per cent.
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