Mr Wood, once one of the UK's highest-paid businessmen, said his decision, which takes effect today, followed the gradual scaling-down of his involvement in the Direct Line group over the past 18 months.
He is being replaced as group chief executive by Ian Chippendale, his deputy, who already heads the company's insurance subsidiary.
Lord Younger of Prestwick, chairman of Royal Bank of Scotland, which owns Direct Line, yesterday paid tribute to Mr Wood's work: "He has transformed financial services and has made an enormous contribution to the success of Royal Bank of Scotland over the past 13 years. Peter is an outstanding entrepreneur and I am sure that he will go on to even greater success with all his new business interests."
Mr Wood said he would continue as chairman of Privilege, the non-standard risk insurer he founded jointly with Royal Bank of Scotland three years ago. He will remain involved in Direct Response Corporation, which writes car insurance in the US, where he is also planning a home insurance venture.
"I have total confidence in Ian as my successor. My greatest strength is building businesses. Given my growing business interests world-wide, I consider this an ideal time for him to take full control of the group."
Mr Wood added that he had been building Direct Line's management team ever since scaling down his involvement, which last year saw him relinquish control over the group's insurance operation.
Direct Line, formed in 1985, was the first firm to sell motor insurance policies over the phone, rapidly building its business to include home and contents cover, PEPs, travel cover, loans, savings accounts and personal pensions.
During the early 1990s he was one of the UK's best-paid chief executives, earning bonuses of up to pounds 18m a year until RBS bought out his bonus scheme for pounds 24m in 1993.Reuse content