Insurers cash in on RTA claims drop during lockdown
By John Hyde >>
Insurance chiefs say motorists are benefitting from cheaper premiums after a year in which the number of claims dropped sharply.
Leading motor insurance firms have reported profit increases and paid out increased dividends to shareholders after a year in which the number of journeys fell because of lockdown.
The Association of British Insurers today said that the cost of motor insurance had dropped to its lowest in five years, with a £38 average fall in premiums in the first half of this year.
The current average of £430 is the lowest since the first quarter of 2016.
The ABI says the fall in part reflects insurers passing on cost savings from fewer claims settled during previous lockdowns, with fewer vehicles on the roads. But it also comes despite the continued cost pressures for insurers of rising repair bills.
It is also worth noting that the fall occurred before the new whiplash reforms came into force, with the official injury claims portal launched at the end of May to let litigants handle their own claims. Insurers have promised that premiums will fall by an average of £35, although this promise is unlikely to be tested by the Ministry of Justice until 2024.
While insurers say that savings from the last year have been passed on, the reduction in claims has also resulted in a massive profits boost for the businesses.
Direct Line Group, one of the biggest motor insurers, reported last week that profit before tax in the first half of 2021 was up 10.5% to £261.3m. The company declared an interim dividend of 7.6p per share – 2.7% up on the same period last year.
Penny James, Direct Line chief executive, said: ‘In motor we saw claims frequency remain below normal levels, fewer new car sales and a reduction in new drivers entering the market. These factors were strongest in Q1 and have started to reverse in Q2 at the same time as motor market premium stabilised.’
Three weeks ago, Admiral reported that profits were likely to double to as much as £500m for the first six months of the current financial year, citing low claims numbers for the previous 12 months.
(Courtesy: The Law Society Gazette)