The Liberal Democrats are leading a cross-party call
seeking a rebate for motorists from insurance companies, who are
set to make significant profits as the number of vehicles on the
road - and subsequent number of insurance claims - falls
dramatically due to the Covid-19 crisis.
Citing the "direct correlation between the drop in claims,
driving activity during lockdown and insurance company profits",
Liberal Democrat MP Jamie Stone and other MPs are seeking the
Chancellor's support in ensuring that insurance companies refund
part of customers' premiums, rather than dishing out dividends to
shareholders.
Liberal Democrat MP Jamie Stone said:
"Meeting the COVID-19 threat has meant changing our lives beyond
recognition. One of the most dramatic impacts has been that
millions of people are using their cars much, much less - 75%
less to be precise.
"The motor insurance industry is set to make vast profits as the
number of claims plummets. I am delighted that Admiral are now
saying that they will offer partial customer refunds. However,
many are still failing to reward the trust and loyalty of their
customers. In fact, we have seen payouts to shareholders to the
tune of millions rather than refunds to policyholders unable to
use their vehicles as normal.
"Myself and colleagues across the political spectrum are
therefore urging the Government to take steps to ensure that,
rather than profiting from the pandemic, all motor insurance
companies play a part in supporting the millions of households in
financial crisis as a result of COVID-19, and refund a percentage
of people's annual premiums."
ENDS
Notes to Editors
Please find the full text of the letter to the Chancellor
below.
Dear Chancellor,
We, the undersigned group of cross-party MPs, are writing to you
about motor insurance premiums.
We all pay for the insurance cover on our cars - and the cost of
this cover is directly related to factors such as the type of
vehicle, its use - and the age, experience, and driving record of
the driver(s). This is perfectly acceptable in normal
times.
However, we are now in the midst of the Covid-19 pandemic. Many
aspects of life have completely changed, including how often
we’re using our cars. Motor insurance should be adapting to these
changes.
Car insurers have reported an almost 50% drop in claims during
lockdown. Furthermore, the UK Government has stated that driving
is down by 75% as a result of lockdown. Accordingly, it has been
calculated that insurers are set to make £1 bn profit from all of
the motorists who cannot drive right now.
Insurers in the US and elsewhere have refunded premiums to
customers. Yet, this week we saw the insurance company Hastings
Direct paying a £36m dividend. This was in direct contravention
of Financial Conduct Authority’s instructions not to do so at
this time.
It is important to also note that it is the nature of the motor
insurance business not to cover risk in other insurance sectors.
This means these motor insurance premiums are not offsetting of
losses in other areas. Therefore, there is a direct correlation
between the drop in claims, driving activity during lockdown and
insurance company profits. This is why we have written to you
today.
We do not need to restate all of the financial challenges faced
by families during these desperately difficult times. For this
reason, we, MPs from all political parties, would suggest to you
that HM Treasury take action to ensure that UK insurance
companies repay some, or where appropriate all, of premiums to
customers.
We hope that you give this proposal serious
consideration.
Yours sincerely,
and all here undersigned
Dr
MP
MP
MP
MP
MP
