Car Insurance Firms Bag £4.5B Savings in 2020 Due to COVID-19 Restrictions

Len Burgess[1]

Len Burgess

Money Savings Advice Empty roads

Car insurance firms saved nearly £4.5 billion in payouts in 2020 as British motorists were forced to stay at home during the Coronavirus pandemic. Changing habits resulted in 40% fewer road accidents than in 2019 and a 50% fall in the total value of motoring claims, according to insurance comparator HelloSafe.

After the first national lockdown was eased, we thought that life would go back to normal. However, with that second pandemic wave that is shaking the UK, road traffic has gone down again, and again insurance companies save money on claims.

said HelloSafe's Insurance Expert Antoine Fruchard.

In March, insurers gave the green light to customers who suddenly needed to start using their vehicles to commute because of COVID-19 and pledged not to increase their premiums.

But despite this, the number of people making the daily commute plummeted through lockdown periods, with many employers encouraging staff to work from home to prevent the virus's spread.

According to the government's latest Labour Market Survey, some 40% of employed people worked from home during the first lockdown due to Coronavirus's direct result.

Across the country, Greater London had the most significant drop in motor insurance claims, with less than £693 million claimed this year by drivers than in 2019.

Hot on the heels of the capital, Birmingham, Liverpool, Manchester, and Bristol delivered the most significant savings to insurers, with all five cities recording a drop in the total value of claims by more than 50% when compared to last year.

The report hinted that people living in built-up areas were the most likely to abandon their vehicles and deliver savings to insurers than those living in more rural regions: Scotland, the North East, and Wales all showed a less dramatic reduction in claims compared to the rest of the country.

However, despite the notable savings made by insurers, it is not yet clear whether this will translate into lower premiums for customers when the time comes to renew policies:

With fast-deteriorating economic conditions, Brits are likely to question their 2021 premiums. A discount may be expected in compensation for 2020, a year during which it has often been impossible to get out in the car. Car insurance companies will probably have to make an effort, which could take the shape of a one-shot refund or a premium discount. With an uncertain future ahead, the insurance industry will be watched.

said Mr. Fruchard.

A further fall in insurance premiums would take the cost of motoring insurance to its lowest rate in half a decade. In August, the Association of British Insurers (ABI) reported that the average cost of motor insurance was at a four-year low, costing £460 for comprehensive cover.

The Association pointed to changes in driving habits, fewer road crashes, and a 'very competitive market' as the key drivers behind this year's dip in costs.

However, while the industry seems to be reacting to the new reality facing thousands of motorists in the UK, ABI still advised customers to take their time in finding the best deal:

Continued cost pressures, including rising repair bills and the delay in introducing personal injury reforms, mean that motorists should continue to shop around to ensure they're getting the best deal for their needs

said ABI's General Insurance Manager, Laura Hughes.

Money Savings Advice Author Len Burgess

Len Burgess

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

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