Car insurers who miss this chance to repair their reputations will drive customers away forever

Linda J. Dodson

Admiral lived up to its name this week in leading among its peers by being the first insurer to offer customers a refund on their car cover. 

The £25 automatic rebate per policy will not change people’s lives, nor will the £110m total bill make too large a dent in Admiral’s profits, which grew 10pc to £526m last year. But it’s a welcome move from Britain’s largest car insurer based on the fact that claims will fall as cars remain unused during lockdown. 

Driving has fallen to between 20pc and 40pc of normal levels. Fewer cars on the roads – not to mention the closure of pubs and other watering holes – drastically reduces the risk of a collision. It is expected that motor insurers will save £1bn during the coronavirus epidemic. 

Yet most providers are still charging the same amount for cover. The next-largest car insurers, Direct Line and Aviva, said customers could “ask for a refund” if their mileage would be lower than estimated when they took out the policy. Some firms have offered “payment holidays”, which gives respite but simply adds arrears to later bills. 

Insurance companies are wasting an easy and largely inexpensive opportunity to repair their reputation among customers. For years, insurers have been hollowing out their policies in a race to the bottom on prices, hiding holes in the small print, and penalising loyal customers with price increases when they renew.

In cracking down on this practice last year, the Financial Conduct Authority said six million policyholders were overpaying by £1.2bn a year, or £200 each. 

Premiums have also been climbing for years. The average price of a car policy rose 2.2pc last year to £820. Over-50s paid 47pc more than in 2013, according to the analyst Consumer Intelligence, while drivers aged between 25 and 49 paid a third more.

Insurers say they need to raise prices to cover the costs of more claims and the expense of repairing technologically advanced cars. So why aren’t they dropping premiums in line with the severe fall in claims and repair needs?

Insurers still have time to do right by their customers. Lockdown won’t last forever, but its effects will linger. Insurers who squander this simple win may find that they have driven loyal customers away for good. 

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