Car insurance policies are 'too rigid' and leave customers 'out of pocket'

Many car insurance firms have “not been quick enough” to provide drivers with refunds as firms saved over £500million during the shutdown. The specialists warned insurance firms needed to take the opportunity to “build back better” and said a “more flexible model” would better suit road users.

James Blackham, CEO of car insurance firm ByMiles said: “Despite the vast reduction in claims due to changing habits, not all insurers have been quick enough to provide drivers with refunds.

“With total payouts falling by six percent, the data suggests that insurers have saved almost £530 million – and yet only one in five drivers have received a refund.

“Many areas of society and business are taking the opportunity to build back better post-Covid, and car insurance should be no different.

“If you’re driving less, you’re far less likely to make a claim, so it’s only fair that you should be paying less.

READ MORE: Car insurance: Drivers caught out by cancellation fees

Data from the ABI found payouts had also come down in 2020 but only by around six percent

However, the overall average value of a claim paid in 2020 was up by 17 percent with drivers receiving over £700 more.

The average payout in 2019 was £3,400 but this increased to £4,000 in 2020 to reflect vehicle repair costs.

But the ABI found road traffic levels had decreased dramatically in the year to June 2020 with 14 percent fewer cars on the road.

This means thousands of motorists were left paying for expensive annual rates despite not using their car as intended.

But Laura Hughes, ABI’s manager of General Insurance said motorists “continued to get the best deals” through the pandemic.

She said: “The pandemic has forced many motorists to change their driving habits.

“Predictably, lockdowns have led to far fewer vehicles on the roads, reflected in the fall in the number of motor claims.

“During the pandemic insurers have given additional support to their customers, including options for reduced mileage and help for those struggling to pay their premiums by instalments.

“It is good to see that throughout an uncertain year, motorists continued to get the best deals from a competitive motor insurance market.”

The ABI said insurance firms have continued to provide support including extending cover and adjusting policies.

The ABI said one insurer has refunded £110million to its cars and van insurance customers due to fewer miles being driven.

Meanwhile, many companies have offered customers the option of new payment plans if they are struggling with costs.

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