Insurers accused of overcharging drivers as claims halve during lockdown

Car insurers have been accused of short-changing their customers after a sharp fall in the number of claims in 2020.

The Association of British Insurers (ABI) revealed a 48 per cent drop in claims during the second quarter of the year - the peak of lockdown - with 324,000 claims made between April and June, down from 678,000 in the first quarter.

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It also said that premiums had fallen to a four-year low of £460 but specialist insurance providers have accused traditional rivals of still pocketing up to £1 billion in savings.

The ABI said that the fall in claims reflected the far quieter roads during lockdown - the AA estimates that traffic fell by between 60 and 80 per cent.

The average claim value rose to £4,600 (Photo: Shutterstock)The average claim value rose to £4,600 (Photo: Shutterstock)
The average claim value rose to £4,600 (Photo: Shutterstock)
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However, the overall value of claims did not decrease nearly as quickly, dropping five per cent to £2.1bn, and the value of the average claim actually rose 27 per cent to £4,600. That covers claims made during the second quarter of the year as well as payouts linked to existing claims from previous quarters. The average value of a personal injury claim jumped even further - by 34 per cent to £19,500.

Laura Hughes, ABI’s manager for general insurance, commented: “Lockdown naturally led to far fewer vehicles on the roads, which is reflected in the fall in the number of motor claims.

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“With the average price of motor insurance currently at a four-year low, insurers have been passing on cost savings to their customers. However, cost pressures remain, such as rising vehicle repair costs, reflecting ever more complex vehicle technology and increased vehicle theft.”

While premiums have fallen, James Blackham of By Miles insurance claims other insurers are still failing to pass on large savings to their customers.

He said: “The ABI reported that car insurance claims fell significantly and that £2.1bn was paid out in settled claims. ‘Settled’ is the word to focus on here. 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 £2.1bn paid out over lockdown only a small proportion was for claims actually made during lockdown.

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“At the start of lockdown we predicted that insurers would see £1bn 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. No cars on the roads over lockdown meant reduced risk and far fewer payouts.

“This crisis has shown clearly that the way car insurance works is unfair. The insurance industry needs to take time to adapt and start treating customers fairly.

Commenting on the ABI’s car insurance claims statistics, Dan Hutson, head of motor insurance, at added: “While premiums have reduced over the past few month as a result [of fewer claims], 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.”