Analytics firm GlobalData has said that insurer Admiral’s plan to refund policyholders will set a precedent for other insurers in the UK to follow suit.
While underwriters in the US have been quick to look at return premiums as the use of motor vehicles falls significantly due to social distancing, the UK’s insurers have, as yet, other than Admiral, not seen the need to follow suit.
However, GlobalData said whilst Admiral’s decision to refund policyholders £25 of their premium may seem insignificant to some, the highly competitive nature of the motor insurance market, which saw 30% of customers switch provider in 2019, means this move will improve the company’s customer satisfaction. Admiral is a leading provider of private motor insurance policies in the UK, accounting for 12.8% of the market. As such its decision has put pressure on other underwriters to do the same.
With the lockdown measures in place, the volume of traffic on the UK roads has fallen drastically in recent weeks. As a result, the industry expects to see a considerable fall in the number of claims made, allowing providers to refund a portion of premiums.
Daniel Pearce, Senior Insurance Analyst at GlobalData, explained: “Motor insurance providers in the UK have been under growing pressure to refund policyholders in a move that would bring them in line with those operating in other countries, such as Liberty Mutual and Allstate in the US.
“The move to refund premiums will undoubtedly set a precedent for other leading players, who will want to ensure that policyholders remain loyal to their brand. Given this, it should be expected that other providers will follow suit, but the situation is not straightforward.
“Many providers will be facing an uncertain future given their exposure to other lines of business, where the number of claims has increased following the COVID-19 outbreak and the economic impact is yet to unfold.”