Car insurance claims plummet in 2020 but premiums stay same

The value of settled claims also fell but only by 6% compared to 2019, and the average payout for personal injury rose by 13%.

On average, the value of a paid claim was around £4,000, representing a 17% rise year-on-year.

However, the average price paid by drivers for fully comprehensive car insurance only fell by 1% compared to 2019, with the ABI saying insurers had investing in supporting customers during the pandemic.

Credit: Clari Massimiliano/Shutterstock.com

Fewer claims

The ABI figures show motor insurance claims fell by 19% in 2020, driven mainly by the alteration in people's driving habits due to the Covid-19 pandemic.

This fall is unsurprising, given that fewer vehicles on the road would naturally suggest fewer accidents and therefore fewer claims.

Delving deeper, though, the data shows total payouts only fell by 6% compared to the previous year, and the average personal injury claim rose by 13%.

The average claim value paid by insurers was £4,000 in 2020, an increase of £600 on the £3,400 average in 2019. This rise of 17% was attributed to a rise in vehicle repair cost and personal injury claims.

Looking at personal injury alone, the average payout on that type of claim was £12,100.

Insurance premiums

The fall in claims and value of payouts hasn't been mirrored by a fall in car insurance premiums.

Although average premiums remain at a four-year low, they only fell by around 1% to £465 in 2020.

It means drivers who may have rarely used their cars during 2020 thanks to the pandemic will not see a fall in insurance premiums to reflect the lower volume of vehicles involved in traffic accidents.

However, the ABI point out insurance companies have been working with customers throughout the pandemic to ensure their premiums were affordable.

They list several support measures their members have implemented including:

• Pledging customers driving to and from their workplace due to Covid-19 will not see their insurance policy affected (until 30 April 2021)
• Pledging customers using their own car for voluntary purposes to help others affected by Covid-19 won't see their policy affected (until 30 April 2021)
• Discussing options for those struggling to pay in instalments due to Covid-19
• Discussing options around adjusting premiums and policies in line with using vehicles less often

These last points formed part of the official guidance issued by the Financial Conduct Authority (FCA) in May 2020 which made it a requirement for firms to assess the risk profiles of customers in light of Covid-19.

Cheaper car insurance

Customers frustrated by their premiums staying the same during 2020 despite using their car less may want to compare motor insurance quotes with different providers.

We've got a full guide to finding cheaper car insurance, but customers interested in telematics (black box insurance) should make sure they specifically check whether a provider offers it since they don't always mention it as an option.

In addition, some insurers like LV=GI offer flexible car insurance which acts like a monthly rolling motor insurance product instead of a year-long plan.

Reform proposals put forward by the FCA could stop loyal customers being penalised by their insurer with rising premiums every year but, for now, comparing insurance deals and switching is the best way to get a good deal.