Lockdown: why the gains of insurance companies should be given back to customers

The UK's countrywide lockdown has left customers paying full price for their annual car insurance policy, even though they're barely using their car. This is very unfair.

The motor insurance refund debate has been a hot topic in the media lately, and rightfully so. With a drop of around 75% in car usage in the UK (PDF), insurers are seeing a decline in claims of up to 50%, because of fewer cars on the road. With this dip, motor insurers are set to make £1 billion in profit over the lockdown period. We think it's only fair that this money is automatically returned to customers. It is technically theirs, after all.

After a big push by Cuvva and other industry players to urge insurers to do right by their customers, less than a handful have been forthcoming. Although gestures are definitely heading in the right direction, these incumbents' offerings are dismal. A voucher here and a refund there (that doesn't even cover an average month's premium), still isn't fair. Remember, we've now been in self isolation and lockdown for six weeks and counting.

Automatically refunding customers a month of premium, in line with individual policies, would be a more accurate reflection. Especially for younger drivers, whose premiums can be notoriously high.

Across the pond

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. The industry association Insurance Information Institute estimates that around $10 billion in total will be returned to customers, relieving some financial burden.

Is motor insurance in the US and the UK that different?

Even if you had to take the UK market size into consideration, it's safe to say, UK insurers are very far off the mark when it comes to refunding customers.

Insurers in a number of other countries have offered customer rebates that more fairly align with customers' actual motor usage.

Insurance is broken

The insurance industry is starving for fairer practices and modernisation. This isn't "new" news. Cuvva has been pushing to offer customers more flexibility when it comes to insurance, like hourly car insurance through an app.

After the way the insurance industry has handled the pandemic on the whole, we think it's safe to say insurance is officially broken.

People buy insurance to safeguard themselves from unforeseen circumstances. When it comes to paying out - insurers duck and dive and are impossible to reach. This will inevitably leave a sour taste in consumers' mouths.

No one wants to be stuck paying for an annual car insurance policy they can't use.

No one wants to pay when they have to make small adjustments to their insurance policy. And consumers definitely don't want to pay a fee to cancel a policy.

What you can do

Chat to your insurer: we'd encourage you to chat to your insurance provider if you're struggling to meet car insurance payments, or feel your annual policy should be adjusted, if you've barely used your car.

Ask to waiver additional fees: if you need to make changes to your policy ("mid-term adjustments", in insurance speak) and your insurer charges you to make those changes, ask them if they'd hold the fees. You've got nothing to lose.

Shop around: if your insurer can't offer you any flexibility to support you then shop around. You might find other insurers will give you more options. What's important is making sure you go for the right level of cover for your needs, while your car is parked at home, and also when you need to use your car for essential trips.

Use temporary cover: if you have access to a car, get covered with hourly insurance when you need to run an essential errand instead of being added as a named driver and have to pay for time you don't need.

What we're going to do

Fight for consumers' best interests: we'll continue to fight for consumers that are being hard done by insurers and their archaic ways.

Offer flexible insurance: we're going to continue to build simple and flexible insurance products that our customers actually need, and hopefully contribute to making insurance way more tolerable. (And maybe even pleasant.)

Prioritise customer support: we'll continue to provide our customers with top notch customer service. What does that look like? In-app customer support with an average one minute response time, 9am to 9pm, all year round.

Never charge unfair fees: Unlike other insurers, we're never going to charge our customers additional fees to make small adjusts to a policy. Circumstances change - we get it. We don't get why customers should pay for these adjustments. We also won't ever charge our customers a cancellation fee. If a customer leaves, why should we gain from it?

At the end of the day, motor insurers profiting from the pandemic is morally wrong, whichever way you look at it. It's not surprising the insurance industry has a very poor reputation when compared to other industries.

Acting fairly in the eyes of customers should be insurers' primary focus, especially while car owners are stuck in long-term car insurance contracts, paying for a service they can't use.