30 Apr 2020
Posted in Insurance
Insurers reimbursing motor premiums is a positive step but risky customers may not be getting value
Following the news that AXA Ireland is to refund all motor customers a flat fee of EUR33 (£29), due to reduced usage during lockdown.
Ben Carey-Evans, Insurance Analyst at GlobalData, comments:
“AXA Ireland has followed Admiral in offering motor insurance customers money back on their premiums, in the form of a flat fee for all. This is undoubtedly a positive step and rare good PR for insurers at the moment.
“However, if this trend continues, there is a risk younger drivers may start to feel hard-done-by. They are considered to be riskier by insurers and consequently pay higher premiums. Their extra risk is mitigated by reduced driving, but they will receive a lower percentage of their premiums back, compared to older generations.
“GlobalData’s 2019 UK Insurance Consumer Survey found that over one in five (21.6%) motor insurance policyholders switched their accounts at their last renewal. A further 41.3% researched prices, before renewing with the same insurer, meaning they were open to switching. Only 25.4% renewed automatically, which shows that these customers are always somewhat at risk.
“Currently, Admiral and AXA Ireland standout as positive examples. However, if and when other insurers follow suit as the lockdown continues, it may be best to consider offering refunds as a percentage of premiums, so everyone is getting a fair deal. A flat fee of around £30 may not be enough to encourage young drivers with premiums of in excess of £1,000 per year to renew their policies.”