Car insurers ordered to offer refunds and payment freezes to motorists
Car insurers have been ordered to offer refunds, policy swaps and payment holidays to customers left struggling by the coronavirus outbreak.
The Financial Conduct Authority (FCA) - the UK's financial regulator - has said that insurers must act to ensure policies and premiums reflect drivers’ changed circumstances and that customers are getting value for money during the pandemic and associated lockdown.
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Hide AdMost drivers have used their cars far less during lockdown, reflected in an 80 per cent drop in traffic and a fall in the number of claims made to car insurers.
Among the measures designed to help drivers struggling during lockdown are an instruction to waive policy amendment or cancellation fees so drivers can, for example, lower their predicted mileage or swap to a cheaper policy elsewhere.
Insurers have also been told to reassess customers’ risk profiles and, if appropriate, lower their costs accordingly. For some drivers this will mean lower monthly payments, while drivers who paid for their premiums in a single annual payment could be given a partial refund.
Payment freeze
Drivers who are struggling financially could also qualify for payment holidays of up to three months while remaining covered under the new rules. You will need to contact your insurer to request such a freeze but should not be charged any admin fee for doing so.
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Hide AdIn all cases, customers need to contact their insurer to discuss their circumstances, and the FCA rules will be reviewed in mid-August.
The insurance industry was previously accused of keeping up to £1 billion of savings from customers as claims fell sharply during lockdown.
Some insurers previously said customers could alter their policies in the usual way if their expected mileage dropped but only two - Admiral and LV= - offered a straight refund. The new rules mean that insurers will not be allowed to charge customers for making changing to their policies such as mileage estimates.
The FCA previously announced steps to help motorists struggling with car finance payments. In April it set out guidelines for lenders which required them to offer a payment holiday of up to three months to drivers facing temporary financial difficulties caused by the coronavirus outbreak.