RAC Says Many UK Drivers Still Cheesed Off With Insurers

Some interesting research from the RAC;

Half of drivers (51%) believe they are paying too much for car insurance given how little they have been driving since the pandemic, with a similar proportion (50%) unable to switch to a cheaper policy without getting charged, research for RAC Pay by Mile Insurance has found.

With Covid-19 having heavily impacted the distances if not the frequency of trips taken by car, the survey of 2,100 drivers suggests many are starting to question whether they are being charged a fair price for their insurance – something that’s only set to get worse given more than a quarter (27%) expect to drive less in the future than they did before the pandemic.

New government data from MOT tests also suggests a trend towards many motorists driving fewer miles a year, which began several years ago, has been dramatically exacerbated by the pandemic. Between 2017 and 2020 the number of cars driven fewer than 6,000 miles between annual MOTs rose by an estimated average of 6% a year, but in the 12 months to the end of February 2021 this accelerated by a huge 35% compared to the same period in 2020. Separate government data shows that in 2019 drivers covered 20% fewer miles than two decades ago.

Of those motorists who feel they are now paying too much for their insurance given they are driving so much less, 50% know they would get charged if they cancelled their current policies in seek of a better deal elsewhere – highlighting the inflexibility of many conventional car insurance policies at a time when travel behaviours are changing drastically. A tiny proportion of drivers – just 3% – knew they could cancel their current policies without incurring an exit fee.

RAC head of insurance development Laura Truman said:

“While it remains to be seen how our driving habits change as a result of the pandemic, it seems fair to presume that many of us won’t go back to driving the sort of miles we used to – especially if a degree of home-working becomes the norm. But even without the impact of Covid-19, it’s clear the number of cars covering fewer than 6,000 miles a year has been going up in recent years.

“This shift is clearly prompting drivers to question whether the cost of their car insurance is reasonable. This might partly be because in so many cases motorists are forced to lock themselves into annual insurance contracts, the price of which is partly determined by the policyholder’s estimate of how many miles they’ll cover in a year. This is something we know drivers found difficult to estimate before the pandemic but considering all the uncertainty surrounding people’s future travel needs it must now be even harder.”

THE FUTURE IS ON-DEMAND

New insurance brands like By Miles, Finder and Cuvva have all prompted big name brands to offer more flexible PAYG car insurance. Other brands like Zego have brought the Pay-per-Mile model to the courier/delivery sector, and there is no reason to think that this kind of payment-per-journey approach cannot win over a new generation of drivers who use their cars – or their parents’ cars – about once a week for leisure reasons.

INDUSTRY COMMENT;

Manan Sagar, CTO, Insurance Services at Fujitsu UK & Ireland:

“Many of the services that consumers pay for today, like heating and electricity, operate on a smart and agile pricing model, where you are charged for the amount you use. Unfortunately, the same cannot be said for car insurance. While Covid-19 has pushed consumers to use digital solutions more and more, insurance companies need to adopt technology that enables better services, at a more convenient cost. To do so means shifting from a ‘repair and replace’ model to a ‘predict and prevent’ approach.

“Car insurers can adopt a dynamic risk-based pricing, or in other words, a “smart insurance policy” that shifts prices based on driver data. What’s more, it can be used to help people save money and be safer, by collecting data from incidents as they happen. Insurers can better understand the common signifiers of potential risks that lead to claims, more accurately determine high-risk scenarios and be prepared to deal with them faster; it could even help prevent accidents from happening in the first place.

“Ultimately, this approach creates a policy where rates increase if a driver goes over speed limits, posing a risk not only to themselves but to the wider driving ecosystem. And very few would challenge an increase in premiums for a journey where speed limits are consciously being broken. This mindset shift can improve driving habits and promote safety for everyone on the road, so it’s a win-win for the customer and insurer.”