Britain’s biggest car insurer, Direct Line Group, has applied to the Solicitors Regulation Authority to become an alternative business structure.

The insurer wants to create a newly formed and wholly owned law firm, DLG Legal Services, to operate in partnership with existing law firm Parabis.

Direct Line Group already provides customers of its own Direct Line, Churchill, Privilege and other insurance brands with some legal services in-house and through outsourcing agreements with a panel of law firms.

The AIM-listed company has now decided it is ‘in the clear interest’ of customers to provide a broad range of legal services.

The new firm’s remit will include legal advice and management of personal injury or non-injury claims, debt recovery, employment and contract issues.

In a statement, Direct Line said customers who have already bought motor or family legal protection policies and choose to be represented by DLG Legal ‘will receive 100% of any damages awarded, protecting them from the cost of paying success fees typically levied by alternative legal services providers’.

Customers will be able to appoint a solicitor of their own choosing, in line with policy terms and conditions.

Clients who do not have motor or family polices will pay a ‘standalone fee arrangement’ under which fees will be deducted from the damages awarded.

The DLG statement does not specify how big this deduction will be, but says it will ‘maximise customer compensation after deducting legal costs, and be proportionate to the risk taken by DLG Legal’.

The company added that DLG Legal is not expected to make a ‘material contribution’ to the overall group’s profits.

Paul Geddes, chief executive of Direct Line Group, said the firm was launched to extend legal services for existing insurance customers.

‘We have the opportunity to protect our customers from excessive legal costs, especially in the event of a personal injury claim,’ he said. ‘It will also help our customers to have affordable access to justice, should they need it.’

Direct Line has been one of the biggest advocates for civil justice reforms and last week its managing director Tom Woolgrove called for a fresh debate about damages for whiplash claims.

The company last month announced plans for 2,000 redundancies across the group, including 40 Parabis staff handling claims sub-contracted from an office in Liverpool. Efforts continue to find them alternative roles in the firm.

Parabis, which offers claimant and defendant services under a range of brands, has grown rapidly in recent months after securing up to £200m from private equity investor Duke Street in February 2012. The firm became an ABS itself in August 2012 having applied for the status before the investment.