Motor insurers save £3.3b thanks to fewer claims during pandemic, finds ACSO

A new study commissioned by the Association of Consumer Support Organisations (ACSO) has found that motor insurers benefitted from a windfall of £118 per policy—or £3.3 billion in total—because fewer policyholders made claims during the pandemic. 

The resulting report, Profiting from Pandemic Premiums, cites Association of British Insurers (ABI) figures that suggest the number of motor claims settled fell by nearly 20% in 2020. Meanwhile, prices were reduced by £25 in the last 18 months.

Mileage, accidents and thefts all fell during 2020, by 25%, 23%, and 21%, respectively, according to the report, yet premiums fell by 9%.

This enabled motor insurers to boost their profits from underwriting motor insurance by £3.3 billion, “but the hard-pressed motorist has barely benefitted,” commented Matthew Maxwell Scott, executive director of claimant-focused trade group ACSO. “Insurers need to give consumers a break and commit to a substantial and immediate cut in car insurance prices.” 

Mark Pragnell, founder of economics consultancy Pragmatix Advisory and the author of the report, added: “Our analysis of published information from the ABI and the financial performance of the largest insurers shows that the 18 months of pandemic lockdowns and emergency measures provided an unexpected and substantial windfall to motor insurers.”

“Covid has handed insurers £3.3bn of free cash, which is equivalent to £118 per policy. So far, the industry has reduced premiums by an average of £25.”

Maxwell Scott continued: “If insurers are keen to trumpet the £25 drop in premiums during the past 18 months, it’s worth asking why they have kept quiet about the further £93 per policy in unexpected profits, for which they have had to do nothing.”

ACSO wants motor insurers to be far more transparent about pricing, given that motor insurance is a compulsory and essential purchase.

Maxwell Scott said: “A number of price-comparison sites release information about premiums, but they vary widely.”

“According to Confused.com, the average premium was £763 in 2020, while for Moneysupermarket it was £470, and for Compare the Market it was £707. The ABI data we used was the lowest, at £465 for an average policy. No wonder consumers are confused.”  

“The only way to be certain that the consumer is getting a fair deal from motor insurers is for them to submit their numbers to an official body for peer review.”

 “We believe that, for a compulsory product like car insurance, it is not okay for insurers to mark their own homework. In the name of transparency and fairness to consumers we’ve written to the business secretary to request that he commissions the Official for National Statistics to review industry pricing data.”

He added: “There may be a number of reasons why insurers charge what they do. But if claims numbers drop precipitously and there’s very little fall in prices then somebody is doing rather well out of a very regrettable set of circumstances.”

“Insurers are dragging their feet on paying out claims for business interruption, and now it appears from our research that they are keeping under wraps the true extent of their pandemic profits from car insurance too.”

Mark Dugdale