We store cookies on your device to make sure we give you the best experience on this website. I'm fine with this - Turn cookies off
Switch to an accessible version of this website which is easier to read. (requires cookies)

Lib Dems lead cross party call to reduce motor premiums as car use plummets

April 25, 2020 1:56 PM
By Rugby Lib Dems

LD demand betterThe 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."

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,

Jamie Stone MP and all here undersigned

Chris Bryant MP
Dr Lisa Cameron MP
Alistair Carmichael MP
Wendy Chamberlain MP
Daisy Cooper MP
Sir Ed Davey MP
Colum Eastwood MP
Tim Farron MP
Marion Fellows MP
Stephen Flynn MP
Paul Girvan MP
Claire Hanna MP
Neale Hanvey MP
Wera Hobhouse MP
Sir George Howarth MP
Christine Jardine MP
David Linden MP
Angus MacNeil MP
Shabana Mahmood MP
Layla Moran MP
Sarah Olney MP
Virendra Sharma MP
Tommy Sheppard MP
Henry Smith MP
Zarah Sultana MP
Munira Wilson MP