The Financial Conduct Authority (FCA) today released finalised measures it has put in place for motor insurers to implement, in a push to driver fairer practices after millions of customers have been stuck paying for annual car insurance, while their cars sit at home in lockdown.
Insurers will have to assess customers’ risk profile and adjust premiums to match actual usage, review product offerings to better suit customers current needs, and waiver all cancellation and admin fees, usually charged when making policy adjustments. Stemmed from industry pressure and FCA intervention, these are some of the proposed measures that are expected to be implemented by insurers by Monday, 18 May 2020 and will be reviewed in three months.
Since the start of lockdown, industry challengers including flexible insurance provider, Cuvva have been putting pressure on incumbents to do right by their customers and treat their customers fairly. Commenting on the regulator’s measures, Cuvva founder, Freddy Macnamara said: “Insurers need to provide customers with flexibility and value now more than ever. FCA’s recommendations are a positive step in the right direction for the industry in terms of treating customers more fairly.
“Motor insurance customers shouldn’t have to bear the burden of losses that insurers may experience in other facets of the business from the pandemic, like travel.”
Direct Line reported a 70% decrease in motor insurance claims in April alone. “With a drop in claims of this magnitude, motor insurers could profit as much as £1 billion from the pandemic, which should automatically be returned to customers”, says Macnamara.
Various approaches have been taken by insurers in an attempt to offer its customers some sort of rebate, under industry pressure. Admiral is the only insurer that agreed to automatically refund customers £25 per car, totalling £110 million. LV= has set aside £30 million for partial refunds for those customers struggling financially and meet certain criteria. But the majority of incumbents have been digging their heels, reviewing needs on a case by case basis. Axa said they’re waiting to see what the outcome is before refunding customers.
Macnamara says, “At a minimum, a one month premium refund would be fairer than what’s currently being offered to motor insurance customers in the UK.”
More than 20 major insurers in the US have taken it upon themselves to offer customers an automatic refund to more fairly price current car usage. Industry association – Insurance Information Institute estimates that around $10 billion in total will be returned to customers, relieving some financial burden.
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