Six month coronavirus lockdown could force 'total reassessment' of motor insurance risks

Car parked driveway

Falling motor claims frequencies may mean insurers reconsider what they’re charging policyholders, though their ability to act proactively could be stymied by uncertainty over the length of the Covid-19 emergency, an event heard.

Speaking on a webcast as part of Post’s Motor Insurance World Live on Wednesday, former Zurich personal lines pricing director Gareth McChesney said: “Claims frequencies during the lockdown period are looking to be reduced by between 50% and 70%. It’s a significant reduction and supports a necessity of a lower premium if that was to become the new norm.

“The unknown factor, which will be the real influence, is how long this situation is going to remain for. If it’s a matter of weeks, then it’s likely to offset some claims inflation.

“If it’s three months, then we’re probably looking at the more significant impact, but if it’s six months or a more permanent change to behaviour, clearly a total reassessment of insurance risks is needed.”

Commenting the idea of some kind of premium rebate, McChesney said: “What is that rebate? Is it perhaps a renewal bonus next year? It’s impossible to predict at this stage.

“Of course, proactivity by insurers around this will be a reputational benefit to the industry, but unfortunately, I suspect, we will only know what form the benefits will likely take after there has been consumer pressure to commit to doing something.”

Question marks

In addition to uncertainty over when measures imposed to deal with the outbreak will be lifted, there are question marks over claims frequency figures and what they actually represent.

Calum McPhail, head of liability claims for motor and casualty at Zurich, said: “We see frequency figures coming from various parts of the world that appear to be further ahead in the cycle than we are, but each insurance market is very different.

“There’s no doubt that within the UK we have a particular structure to our claims market. We understand roughly what the time lag is the, for example, a whiplash claim.

“Approximately from the date of accident until notification within the Ministry of Justice portal, you’re probably looking at 50% to 60% of claims of that nature being lodged within five to six weeks.

“The drop in frequency that we have seen so far is beyond that, which to me suggests that we still actually have a number of claims that will come through that we’re not seeing at the moment. It’s really difficult to understand where the true frequency lies.

“As we come out of lockdown, we will see a surge in claims frequency or claims notifications and part of that will be because perhaps injured parties have not been able to speak to lawyers or lawyers have not been able to get claims registered.”


Both McChesney and McPhail went on to speculate on whether the pandemic and the lockdowns it has necessitated will have lasting effects on driver behaviour that again change the profile of motor risk.

“Once lockdown is lifted, do motorists still have jobs?” said McChesney. “Do they drive more? Do they visit friends and families that have been missed?

“If they haven’t been driving for a number of months, do rusty driving skills and increased mileage drive up frequencies?”

McPhail said: “A lot of industries that probably thought they didn’t have the technology or the ability for people to work from home have now found that they do.

“If this goes on for a lengthy period of time, people may start to rethink what their commute looks like and what they use vehicles for.

“You’ll probably find motorists starting to think now about whether they want to go onto a telemetry-based product that shows how much I use my vehicle because I’m using it less than the average. It may start to open people’s minds to different approaches on how they use and insure their vehicles.”

Motor insurance world live audio event

Attend Motor Insurance World 2020 this afternoon

Tackling the big questions as laid out in the Department for Transport’s Future of Transport Report, we’ll be putting questions to our panel about one of the most important, topical and contested debates in the motor insurance and regulatory space.

Joining us for the live discussion at 2:30pm we have Steve Gooding of the RAC Foundation, Alex Lewis-Jone of Delta EE, Nick Pester of Zego and David Williams of Axa.

To watch please click here.


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