Mr. Elkins: Direct General began its operations in April 1991, operating in the State of Tennessee with a single state charted insurance company named Direct Insurance Company. Our current holding company was established in 1994. We are an insurance holding company based in Tennessee, that predominantly offers a core product of nonstandard automobile insurance and ancillary insurance and non-insurance products to our customers throughout the southeastern United States. Our customers tend to be lower to middle income customers who are in search of convenient payment plans, overall value and great customer service. The distinguishing factor between Direct General and most of our competitors is the business model that we utilized to serve our customers. In our business model, we own all the insurance companies, the agency offices and the finance companies, and basically have a completely controlled sales and distribution network that is serviced through salaried employee agents versus commissioned independent agents.
TWST: Typically, how much excess premium do these insurance policies run
compared to the standard insurance?
Mr. Elkins: That's a little difficult to determine because there is not
a bright line between the standard and nonstandard markets. Generally, I
would say, the insurance premiums on nonstandard policies are higher
than that of a standard carrier, predominantly due to the higher
frequency of claims. I would add that while the frequency of claims is
higher in the nonstandard industry, loss payments are typically less
because most nonstardard policies are written for lower limits of
liability and the customers' vehicles are generally of lower value than
that of the customers who qualify for standard insurance.
Tickers included in this excerpt: DRCT
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