The company, owned by Royal Bank of Scotland (RBS), announced it will no longer accept applications for life or critical illness cover and apologised for any inconvenience.
The life and critical illness products were only sold direct to consumer and not through advisers.
Paul Cowman, director of lifestyle at RBS Insurance, said: “Following a strategic review of Direct Line Life, we identified that it needed considerable investment to improve its infrastructure.
“We explored a number of options to address the future of the business but unfortunately none of them provided a viable solution that would benefit our colleagues, customers and stakeholders.
“Collective consultation with employee representatives has concluded and the FSA has agreed our proposal to cease writing new individual Direct Line Life and Critical Illness business.
“Our people have been informed of the decision and we are now in the process of consulting with the impacted individuals.”