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Press Release

Car insurance premiums appear to fall, yet COVID-19 uncertainty clouds future claims and pricing trends

Insurance Consulting and Technology|Personal Lines
Insurer Solutions|

July 16, 2020

  • Prices fall by 5% to £770 in the last quarter – the largest quarterly drop since early 2018 - with drivers now paying £19 less than they were this time last year.
  • However, analysis of the complex drivers behind market prices during the last three months suggest that the impact of COVID-19 is about more than just the surface level market price changes.

LONDON, 16 July, 2020 — Comprehensive car insurance premiums have fallen by 5% (£39) in the second quarter of 2020, according to the latest Confused.com Car Insurance Price Index in association with Willis Towers Watson.

The average cost of car insurance is now £770, following a £19 (2%) decrease over the past year, according to the longest established and most comprehensive car insurance price index in the UK, which is based on price data compiled from almost six million customer quotes per quarter.

Source: Willis Towers Watson / Confused.com Car Insurance Price Index. *Values rounded to the nearest whole number.
Comprehensive Car Insurance - Quarterly Price Trends
2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2
Average Premium* £789 £783 £7815 £809 £770
% Change in Quarter* +3% -1% +4% -1% -5%
£ Change in Quarter* +£27 -£6 +£32 -£6 -£39
% Change Annually* +5% +3% +5% +6% -4%
£ Change Annually* +£36 +£23 +£41 +£47 -£19

Graham Wright, UK Lead of P&C Personal Lines Pricing at Willis Towers Watson, commented: “The sudden drop in traffic during lockdown and fall in accidents and claims inevitably put temporary downward pressure on the cost of premiums. However, a forensic analysis of the complex changes in customer quoting patterns in the last quarter reveals the impact of the pandemic on market dynamics was about more than just price.”

The in-depth research looked beyond price to both changes in the mix of types of people quoting – for example less young driver quotes were conducted because fewer newly qualified young drivers were coming onto the roads – and to changes in the type of quote that customers were requesting. The analysis noted that, for example, customers who might typically be 10,000 mile-per-year drivers were now seeking quotes at lower mileage levels.

The research also investigated changes in the mix of insurers quoting and, with some providers ceasing to quote for different periods, this further affected the composition of insurers making up the top five average price. According to Willis Towers Watson, all of this reveals that whilst insurers took pricing action over the quarter, not all of the surface level changes in market price are necessarily exactly as they seem.

Example trends from April analysis

Research by Willis Towers Watson of individual car insurance market segments revealed significant insights concerning the wider market, in particular during the most restrictive period of lockdown in April, including:

  • Dramatic fall in young drivers – A sharp reduction in new vehicle purchases during lockdown, furloughing of many young customers, and postponement of driving tests saw a drop in new drivers on the roads. In contrast, quotes for “mainstream” vehicles worth less than £18,000, owned for at least a year and for which the potential policyholder had multiple years of no claims bonus, made up 44% of April’s quote exposure. This same segment of quotes represented only 33% in March. The average of the top five quoted premiums for this business segment was £718 in April, down from £734 in March.
  • More cars kept at home during the day – Quote volume for this segment –relating to drivers who have held a licence for at least a year, requesting cover for annual mileage of between 4,000 and 6,000 miles and whose vehicle is kept at home during the day - increased from 23% of the total in March to 26% in April.
  • Fewer drivers in new cars – One segment of the market that saw its quote representation fall dramatically between March and April was recently purchased, previously owned vehicles, at least a year old, having an engine size of 1.5L or less, for policyholders having no NCD entitlement. This segment went from representing 15% of the total quotes in March to only 9% in April.

Graham Wright said: “This analysis showed that some of the initial market-level price reductions seen post-lockdown were driven more by the significant shifts in customer quoting patterns. And although quoting patterns reverted towards more normal trends towards the end of the quarter, the research has only highlighted further the need for insurers and intermediaries to look closely at how they price for the so-called new normal.”

Insurers are attempting to predict claims and adjust prices before the full impact of Covid-19 is known”

Graham Wright,
UK Lead of P&C Personal Lines Pricing at Willis Towers Watson

“Looking further ahead, as we emerge from lockdown and roads become busier, insurers are attempting to predict claims and adjust prices before the full impact of Covid-19 on both medium and long-term frequency and severity trends is known. Whilst there are trends that simultaneously point to both higher and lower levels of driving than before – such as less use of public transport balanced with more working at home - a further headache is estimating the impact on severity from broken repair supply chains, more cyclists on the roads and recessionary trends. These are just some of the moving parts that will make pricing risk correctly even harder than before the COVID-19 crisis – meanwhile all of the challenges from before such as whiplash reforms, inflation and Brexit remain.”

Steve Fletcher, Head of Data Services at Confused.com comments: “Insurers are under pressure to meet their policy targets with fewer customers available and this has resulted in an unusual drop in premiums. People declaring their vehicles SORN, younger drivers being driven off the road and lower mileage have all been factors at play. “Some of these behavioural and market trends will be short lived as lockdown eases and people start to use their cars as PPE over public transport. Others may linger around a little longer as the onset of a recession creeps upon us, and some may even be here to stay, such as fewer commuters as more companies adopt permanent working from home policies. The insurers that will win out are those who keep abreast of the situation and who anticipate that things won’t be going back to the way they were any time soon.”

About the Index

The index is compiled using anonymous data from all enquiries submitted on Confused.com. The prices used for analysis are based on an average of the best five quotes received.

About Confused.Com

Launched in 2002, Confused.com was the UK's first price comparison site for car insurance and is one of the UK’s biggest and most popular price comparison services, generating over one million quotes per month. It has expanded its range of comparison products over the last couple of years to include small van insurance, motorcycle insurance, car buying, and car finance, as well as a number of tools designed to save drivers money on motoring.

Confused.com is not a supplier, insurance company or broker. It provides an objective and unbiased comparison service. By using cutting-edge technology, it has developed a series of intelligent web-based solutions that evaluate a number of risk factors to help customers with their decision-making, subsequently finding them great deals on a wide-range of insurance products, financial services, utilities and more. Confused.com’s service is based on the most up-to-date information provided by UK suppliers and industry regulators.

Confused.com is owned by the Admiral Group plc. Admiral listed on the London Stock Exchange in September 2004. Confused.com is authorised and regulated by the Financial Conduct Authority.

About Insurance Consulting And Technology

Willis Towers Watson’s Insurance Consulting and Technology business has over 1,200 colleagues operating in 35 markets worldwide. It is a leading provider of advice, solutions and software – primarily to the insurance industry. Its consulting services help clients manage risk and capital, improve business performance and create competitive advantage – by focusing on financial and regulatory reporting, enterprise risk and capital management, M&A and corporate restructuring, products, pricing, business management and strategy.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving in more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.

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