Car insurance firms could make £1billion by not offering US-style refunds amid coronavirus

Car insurance firms could make £1billion by not offering US-style refunds amid coronavirus

Car insurance experts said UK firms were not currently offering discounts and urged motorists to make small tweaks to policies to make some savings over the lockdown. It’s a stark contrast to scenes in the USA where insurers have decided to refund customers millions of dollars of pre-paid insurance policies while they cannot use their cars. 

The nation’s fourth largest car insurance firm, Allstar, has promised to give back a total of £490million to customers. 

Drivers in quarantine will receive immediate refunds while other customers will be offered a 15 percent discount on premiums across the next two months. 

Alongside the refunds, Allstar has also put special payment plans into place and will ensure grace periods are introduced without penalties. 

However, despite the offers from US firms, this has not yet been matched by UK car companies. 

READ MORE: Car insurance companies will protect customers

They claim car insurance firms are set to make £1billion during the period and said it was only fair motorists paid less during the crisis if they are not using their cars. 

James Blackham, CEO of ByMiles said: “We’re challenging traditional car insurers to recalculate their rates and make insurance fair under these extraordinary circumstances. 

“As people are driving far fewer miles while in lockdown, the number of insurance claims due to accidents also decreases – and those savings should be passed on to the public.

“At the moment, this situation is only benefitting car insurers who stand to make in excess of £1,000,000,000 from this reduction in claims and it’s important that drivers know this.”

US car insurance firm American Family Insurance says customers will receive a one-off payment from the firm to act as relief during the epidemic. 

A one time payment of $50 for each vehicle will be made while customers who have a private passenger policy will be eligible for a refund. 

Many consumer groups in the US have urged insurance companies to issue refunds to motorists due to the epidemic. 

The Consumer Federation of America and the Center for Economic Justice wrote to companies in mid-March urging them to offer money back.

The Association of British Insurers (ABI) have confirmed many car insurance companies will protect motorists during this period but have not offered financial incentives. 

The assurances mean motorists may be able to use their cars for extra journeys and will not run the risk of invalidating a policy. 

The Financial Conduct Authority (FCA) has also urged car insurance companies to be fair to motorists over the crisis. 

They say the ability for motorists to make a claim should not be affected by the ongoing situation but has also not yet pushed for financial extras to be offered. 

However, car insurance expert Alex Kindred says road users may be able to make savings during this period with a few simple tweaks. 

Mr Kindred said road users would cancel their insurance policies themselves as long as they ensure their car was declared as off-the-road (SORN).

He said: “Insurers understand the difficulties we are all facing and should help where they can in reducing or cutting any charges to change or cancel car insurance policies. 

“Some may take this opportunity to cancel their insurance all together to save some money, and look at other alternatives, such as temporary cover or pay by the mile. 

“However, unless a car is declared off the road, it still needs to be insured even if it’s not being driven.”

Failing to SORN a vehicle and cancelling your policy is illegal and could sewe road users hot with penalties or have their car seized. 

Published at Tue, 07 Apr 2020 09:20:00 +0000