Direct Line, Churchill and Royal Bank of Scotland’s other insurance businesses nearly tumbled into the red in the three months to September, undermining shaky efforts by the part-nationalised bank to return to profitability within 18 months.

Stephen Hester, chief executive, said RBS Insurance, normally a steady contributor to profits, had seen operating profits plunge 93 per cent to £11m, as no win-no fee lawyers had brought costly bodily injury cases against motor insurers.