Politicians call for motor insurers to refund policyholders

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Members of Parliament have called for insurers to refund motorists based on coronavirus lockdown savings, following Admiral's pledged £25 per customer rebate yesterday.

The Liberal Democrats are leading a cross-party call seeking a rebate for motorists from insurance companies, who it says are set to make significant profits as the number of vehicles on the road, and subsequent number of insurance claims, falls drastically due to the Covid-19 crisis.

Liberal Democrat MP Jamie Stone said: “Meeting the Covid-19 threat has meant changing our lives beyond recognition. One of the most dramatic impacts has been that millions of people are using their cars much, much less - 75% less to be precise.

“The motor insurance industry is set to make vast profits as the number of claims plummets. […] Admiral is now saying that it will offer partial customer refunds. However, many are still failing to reward the trust and loyalty of their customers. In fact, we have seen payouts to shareholders to the tune of millions rather than refunds to policyholders unable to use their vehicles as normal.”

Earlier this week, Admiral pledged £110m towards automatic refunds of £25 per policy to return profits from the UK-wide Covid-19 lockdown to customers. It is the only motor insurer in the UK to so far pledge any widespread return of premiums to its customers.

Stone added: “Myself and colleagues across the political spectrum are therefore urging the government to take steps to ensure that, rather than profiting from the pandemic, all motor insurance companies play a part in supporting the millions of households in financial crisis as a result of Covid-19, and refund a percentage of people’s annual premiums.”

 

While Admiral has been praised for the move, James Daley, managing director of consumer champion organisation Fairer Finance, told Post that more is needed from insurers across the board.

A flat payment of £25 is not enough for some customers, who often pay four figures for their car insurance, according to Daley.

He said: “I hope we will see more generous offers than that. If you are a big insurer across multiple lines and you are taking a big hit at the moment then the picture is more complex but businesses should not be using coronavirus as sort of a great boost to the bottom line.”

However, if customers are proactive in contacting their insurers then Daley added that some level of refund is likely to be offered.

He said: “All insurance companies should refund some money if customers get in touch with them and let them know that they are driving less or not at all.”

Daley explained that insurance companies normally would want to charge customers more for driving more and “given that there is an enormous reduction in risk for a number of customers because they are simply not getting in their cars at all in some cases – it is only right that their premiums are less.”

The biggest part of any insurance premium is going towards paying for accidents, Daley said, so if people are not getting in their cars we are going to see a massive fall in the number of personal injury claims and that should have an impact across the whole insurance book.

Daley added: “This is a moment of truth for the insurance industry. We are already seeing most business interruption insurers sitting on their hands and not paying policies and trying to rewrite their policy and there is a lot of very angry small business owners out there and loads of travel insurance customers who are not getting payouts on their policies.

“[Motor] could be the one [area] left trusted after all this, because the whole coronavirus is going to be very damaging for the insurance industry. The early signs are that a lot of insurers are trying to kind of wiggle out. Customers expect insurers to be there so they should be.”

Changing policy

Admiral is the only UK insurer so far to have announced a rebate for its motor customers, though others confirmed they are firming up plans around customer benefits.

Insurers have opted for different measures to ease a financial strain on policyholders during the lockdown

RSA, for example, has given customers the option to change their policy details to reflect their current usage and potentially lower their premium. It has also decided to waive charges for extra miles for those volunteering.

The insurer added that the impact the lockdown could have in the future is uncertain and once the restrictions are lifted policyholders might use their cars more, causing clams to increase.

A spokesperson for RSA said: “This is a difficult time for our customers and we are trying to support them as best we can. We are giving customers the option to update their policies to reflect their current usage and potentially lower their premium, however, it is too early to say how the lockdown may affect claims, and the impact this has on premiums overall. Although some may be using their cars less, we are still insuring customers for theft and vandalism. This is an unprecedented situation, but we are continuing to monitor it closely and are doing everything we can to give customers the support they need.”

A spokesperson for Direct Line also encouraged customers to get in touch and inform the insurer about their lifestyle changes.

They said: “Our intention is to always do what’s right by our customers and ensure they have good value. We don’t want to benefit financially from the lockdown period and we’ve introduced a range of support measures to help our customers, for example in motor, if customers are not using their vehicles, then they should call us to discuss their individual circumstances so that we can provide them with the best option during this difficult period.”

A spokesperson for LV said the insurer is trying to work with families across the UK individually to do everything it can to help.

They added: “This includes finding ways to help customers reduce premiums by temporarily changing the cover our customers have, such as reducing mileage or changing the cover to fire and theft if a customer doesn’t intend to use their car at all. For those hit the hardest, we’re also not charging for admin or cancellations and waiving excesses on claims, as well as offering free enhancements to cover for customers who are NHS and key workers.

Unknown variables

Ageas confirmed it is reviewing its customer proposition to ensure it can “reasonably adapt to best meet their needs” and in anticipation of customers travelling less, it has reduced its pricing to reflect the current situation.

A spokesperson for Ageas added: “The lockdown has had a varied impact on our product lines. While motor claims frequencies have reduced, there are also a number of unknown variables such as how long we expect to be in lockdown, what impact this will have on travel habits when we return to normality, and whether there is a lag in personal injury claims. We continue to work with industry bodies and our intermediated distribution channel so that, when we have a more informed view on the situation, we will be in a better position to consider fair options for our customers.

“Other actions we are taking include extending free breakdown cover to our direct customers who work for the NHS, and where a customer is a key worker (as defined by the UK government) and they need to travel to different locations, they don’t need to worry about changing their car insurance. And where a customer is helping their community by volunteering to deliver food or medicines, they do not need to extend their cover.”

Hastings has also opted for a price reduction for policyholders.

A Hastings spokesperson said: “Our focus has been, and continues to be, to do the right thing for colleagues and policyholders and our communities during Covid-19. In addition to charity and colleague actions, we have already passed on a number of benefits to customers, including price reductions and fee waivers, and financial support for those with payment difficulties, and provided extra help and benefits for NHS and care workers including free breakdown. We do intend to pass further benefits back to customers and will communicate more on this as soon as we have firmed up our plans.”

An Aviva spokesperson added: “We have launched a package of measures aimed at supporting our customers, our key workers and our communities.

“For customers who are driving significantly less, they are able to review their annual mileage and make changes to this if they feel it will be significantly reduced. Customers who pay monthly may have their outstanding premium reduced, while annual customers may receive a refund.”

Aviva has also provided its customers with up to three months of payment deferrals for those experiencing severe financial hardship as a result of the Covid-19 and free breakdown assistance for NHS workers.

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