Shabana has called upon the Chancellor to take action on car insurance premiums in light of the Covid-19 pandemic.
She has signed a letter by Jamie Stone MP, and supported by cross-party MPs, highlighting that despite an almost 50% drop in claims during lockdown, premiums remain at an all-time high.
The letter explains that insurers in the US and elsewhere have refunded premiums to customers. This week we saw the insurance company Hastings Direct paying a £36m dividend, an action in direct contravention of Financial Conduct Authority’s instructions not to do so at this time.
Shabana has long-campaigned on the issue of car insurance. You can see more of her work here.
You can read the letter in full below.
Letter to the Chancellor
We, the undersigned group of cross-party MPs, are writing to you about motor insurance premiums.
We all pay for the insurance cover on our cars – and the cost of this cover is directly related to factors such as the type of vehicle, its use – and the age, experience, and driving record of the driver(s).
This is perfectly acceptable in normal times. However, we are now in the midst of the Covid-19 pandemic. Many aspects of life have completely changed, including how often we’re using our cars. Motor insurance should be adapting to these changes.
Car insurers have reported an almost 50% drop in claims during lockdown. Furthermore, the UK Government has stated that driving is down by 75% as a result of lockdown. Accordingly, it has been calculated that insurers are set to make £1 bn profit from all of the motorists who cannot drive right now.
Insurers in the US and elsewhere have refunded premiums to customers. Yet, this week we saw the insurance company Hastings Direct paying a £36m dividend. This was in direct contravention of Financial Conduct Authority’s instructions not to do so at this time.
It is important to also note that it is the nature of the motor insurance business not to cover risk in other insurance sectors. This means these motor insurance premiums are not offsetting of losses in other areas. Therefore, there is a direct correlation between the drop in claims, driving activity during lockdown and insurance company profits. This is why we have written to you today.
We do not need to restate all of the financial challenges faced by families during these desperately difficult times. For this reason, we, MPs from all political parties, would suggest to you that HM Treasury take action to ensure that UK insurance companies repay some, or where appropriate all, of premiums to customers.
We hope that you give this proposal serious consideration.
Jamie Stone MP and all here undersigned