UK car insurers urged to refund claims windfall
UK MOTOR insurance firms are facing calls to refund stuck-at-home drivers after peers in the US started to hand back money due to a drop in claims.
Car insurance companies have seen accident claims fall by up to 60% in some cases as traffic vanishes from the road thanks to lockdown measures.
Less driving means lower accidents and fewer payouts, which are likely to boost insurers’ profits.
UK insurtech firm Cuvva estimates insurers could be making £1 billion of profit due to the claims drop.
Some US insurers have started to refund stuck-at-home drivers. Geico, the insurer owned by Warren Buffett’s Berkshire Hathaway, is offering $2.5 billion in customer discounts. Allstatis giving back $600 million while American Family Mutual is refunding customers $200 million.
Alliance of British Drivers founder Hugh Bladon said UK insurers should follow suit. “There’s no reason why they shouldn’t reduce premiums for everyone at the end of the year,” he said.
“The administrative tangle of giving some people a refund would be an impossible task but they are without doubt making extra money and therefore we should see a reduction in our premiums next year.”
Cuvva founder Freddy Macnamara said: “There’s a £1 billion of pure profit that really should go back to customers. If insurers don’t pre-empt that they will probably have to give back more.”
He also called on the Government to relax laws that cars be insured at all time, which could also save drivers money.
Cuvva is chaired by Lloyd’s of London chairman Bruce Carnegie-Brown. Macnamara said these were his own views.
The Association of British Insurers, said any return of money would be a decision for individual insurers.
RBC analysts say despite a 70% drop in traffic during the lockdown insurers could face a spike in claims when restrictions are lifted as more people travel to see friends and family.They also estimate the cost of fixing cars may be higher due to the shortage of parts.
Car insurers such as Direct Line and RSA last week cut their dividends in a move widely seen as a way to win over public opinion.