Henry Smith MP has signed a cross-party letter to the Treasury calling for action to be taken on motor insurance companies so that customers are repaid some or, where appropriate, all premiums as a result of reduced COVID-19 period vehicle use.
“The effect of the coronavirus pandemic has reached almost every aspect of day-to-day life.
“One of the most notable has been the lack of cars on the road, down by over three quarters, with car insurers reporting an almost 50 per cent drop in claims during lockdown.
“As such, it can’t be right that insurers are set to make around a £1 billion profit from motorists unable to drive right now. Some of that profit must be shared and refunded to policy-holders, many of whom are struggling with cost of living issues as a result of the pandemic restrictions.
“I’m pleased to sign this letter to the Chancellor of the Exchequer calling on fairer treatment for Crawley’s motorists.”
The letter, signed by 27 MPs from seven political parties, is a response to a halving in insurance claims as well as the 75 per cent decrease in driving during lockdown.
At the moment, insurance companies are set to make some £1 billion in profit off the back of motorists who cannot drive at the moment. The letter also acknowledges that insurance companies would not make a loss from this necessary and temporary adjustment.
Note to Editors:
Full text of the letter:
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.
Jamie Stone MP and all here undersigned
|Cross-party letter to Chancellor of the Exchequer on motor insurance premiums||572.45 KB|