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Motor insurers criticised for not passing savings from low number of claims onto drivers 

Motor insurance claims fell by 48 per cent during the lockdown period, when compared to the previous quarter, data from the Association of British Insurers (ABI) has revealed this week.

It said there were 324,000 new claims in the second quarter of the year, compared to the 678,000 received in the first, thanks to the lack of vehicles on the road due to the coronavirus pandemic, when most people were working from home.

The value of claims settled during the period, including existing claims from previous quarters, also fell but at a much slower rate than the number of new claims with £2.1billion paid out – down 5 per cent on the previous quarter.

However, critics have said the savings made by insurers should have been passed on to customers, most of whom have not driven much, if at all, during the pandemic and are likely faced a drop in income during the crisis.

Motor insurance claims fell by 48% during the lockdown period but savings weren't passed on

Motor insurance claims fell by 48% during the lockdown period but savings weren’t passed on

Insurance customers have had to continue paying the same amount for their insurance, despite many not using their car nearly as much as they did before the coronavirus swept the nation.

Greedy insurance companies have pocketed funds rather than compensated motorists during a period when traffic levels fell by as much as 80 per cent.

Many drivers would have welcomed a reimbursement from their provider, especially with millions of Britons facing redundancy, a likely drop in earnings if placed on the government’s furlough scheme and other forms of reduced income.

James Blackham, CEO of By Miles, said: ‘While this may look like insurers are passing on cost savings to customers who have been off the road for months – this is a red herring.

‘Unfortunately, as anyone who has been unlucky enough to have to make a car insurance claim will know, receiving your payout takes time, meaning of the £2.1billion paid out over lockdown only a small proportion was for claims actually made during lockdown.

‘At the start of lockdown we predicted that insurers would see £1billion in savings as UK drivers parked up their cars reducing risk and the need for payouts. With claims nearly halving between April and June, this looks accurate.

‘The fact remains, if you’re driving less, you should pay less. No cars on the roads over lockdown meant reduced risk and far fewer payouts. 

‘While we applaud the few who offered small refunds, no insurer is doing, or has done enough to pass on the savings gained in this period.’

Many motorways were left deserted from March onwards as people were told to stay at home

Many motorways were left deserted from March onwards as people were told to stay at home

Dan Hutson, head of motor insurance, at Compare the Market, added: ‘The fall in the number of claims is a clear result of the reduced number of cars on the road during the pandemic.

‘While premiums have reduced over the past few month as a result, it is essential that insurers continue to pass on any savings that they receive onto their customers, many of which are struggling financially from the impact of the pandemic.

‘Despite the recent fall in premiums, motor insurance is in danger of becoming an unaffordable luxury for many and this could have significant consequences given the importance of cars in everyday life.’

Admiral was one of the only car insurers to compensate its customers for continuing to pay their insurance despite low usage during the lockdown period, offering a blanket £25 refund – a total return of £110million.

Cristina Nestares, chief executive of UK insurance at Admiral, said at the time: ‘The Admiral stay at home refund was launched to recognise the considerable efforts people are making by staying home as much as possible and as a result driving less.’ 

LV= also made £30million available to customers who have an existing direct car or motorbike insurance policy with it.

However, this wasn’t a simple refund for all customers like Admiral.

Instead it was only for those who had not yet received the 80 per cent payment scheme from their employer, are self-employed and are unable to work or trade because of coronavirus and haven’t yet received the 80 per cent payment scheme via the government or were made unemployed at any point after 1 March 2020.

Customers are encouraged to use price comparison sites to see if they can lower their bills

Customers are encouraged to use price comparison sites to see if they can lower their bills

Therefore, those who were still employed and working from home would not be eligible for any form of refund from the company.

No other car insurer made a refund available to their customers during the lockdown period, despite claims falling significantly. 

The data from the ABI also revealed that claim payouts were down during the lockdown period but fell at a lower rate.

However, the value of the average claim paid jumped 27 per cent on the previous quarter to £4,600 – the largest quarter to quarter rise on record.

The value of both the average theft and accidental damage claim rose by 14 per cent whilst the average value of personal injury claims notified leapt by 34 per cent to £19,500.

The figures come as the average price paid for comprehensive motor insurance at £460 currently stands at a four-year low.

Laura Hughes, ABI’s Manager for General Insurance, said: ‘Lockdown naturally led to far fewer vehicles on the roads, which is reflected in the fall in the number of motor claims.

‘However, cost pressures remain, such as rising vehicle repair costs, reflecting ever more complex vehicle technology and increased vehicle theft.’ 

Customers whose insurance is up for renewal are advised to use price comparison sites to see if they could save money with another supplier rather than let their policy renew automatically.

It is also advisable to contact your insurer directly and see if you can negotiate down the price of your policy as you could get your policy charge discounted.

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