Insurance giant Direct Line Group is set to launch a new legal services venture after applying to the Solicitors Regulation Authority to form an alternative business structure (ABS) in partnership with Parabis Law.

The new business, DLG Legal Services – described by Direct Line as "a newly formed and wholly owned law firm" – will provide its customers with legal advice on personal injury and non-injury claims, including debt recovery, employment and contract matters.

Staff from Parabis, with which Direct Line has a longstanding relationship, will be subcontracted to work alongside members of Direct Line's in-house legal team.

Customers of Direct Line's insurance brands such as Churchill and Privilege currently have access to the group's in-house legal team and a panel of law firms. Direct Line said customers of its motor or family protection policies who choose to be represented by the new entity would receive 100% of any damages awarded, though the company will receive a standalone fee. Policy customers can still choose to appoint their own solicitor.

The group does not expect DLG Legal Services to make a material contribution to the company's profits.

The move comes after Direct Line last October signalled its intention to become an ABS following its separation from the Royal Bank of Scotland.

"We've decided to launch a law firm to extend the legal services we provide to our insurance customers," said Direct Line Group chief executive officer Paul Geddes. "We have the opportunity to protect our customers from excessive legal costs, especially in the event of a personal injury claim."

Geddes billed the move as an important step for increased access to justice for the insurer's customers, "at a time when fewer and fewer Britons are eligible for legal aid".

"This is a very significant development in a period of major change in the delivery of insurance and legal services," commented Parabis Law senior partner Tim Roberts.

"DLG is putting itself at the forefront of providing cost-effective quality legal services to its customers and we welcome the opportunity to be its legal partner."

Last month, a 40-strong Liverpool-based team of fee earners and support staff subcontracted to Direct Line by Parabis was told it faced job losses. Parabis said it did not expect to make redundancies in the insurance claims-focused team, but that it was considering redeploying staff to other Parabis offices, most likely Manchester.

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