Direct Line says car accident insurance claims may never return to pre-Covid level

According to an article in The Times, insurance claims for car accidents may never return to their levels before the pandemic because there will be fewer drivers on the roads during rush hour as more people work from home, a leading provider of motor cover has predicted.

I think the operative word in the above quote is “may”.

Penny James, chief executive of Direct Line, said the group’s “working assumption” was that the number of accidents relative to miles driven would be permanently lower. This was because there will be fewer “commuter-shunt” incidents, she said.

The unexpected success of the shift to remote working the during lockdowns has prompted many big employers to say that they will retain an element of home working in the future.

James, 51, said there were signs that changes in customers’ behaviour were affecting motor claims. As coronavirus restrictions have eased, miles driven have returned to pre-Covid levels. Yet claims frequency was lagging, she said. “We believe that is because the miles people are doing, they are doing in a slightly different mix to what they were before, largely because there are less people driving in the heat of rush hour.”

She was speaking as Direct Line announced stronger first-half results than had ben expected, with pre-tax profits rising by 10.5 per cent to £261.3 million in the six months to the end of June compared with a year earlier. It was buoyed by lower motor claims, as well as mild weather that benefited its home insurance business. It declared a 7.6p a share interim dividend, up from 7.4p a year ago.

There have been suggestions that motor insurers could face a backlash from customers for profiting from restrictions that forced people off the roads. James did not expect this because of the premium refunds Direct Line had given customers, and the fact that prices had fallen across the period.

In another take on the same story, which appeared in the Evening Standard, Direct Line also said motor premiums had stabilised and claims frequency levels were returning to normal after the easing of lockdown restrictions. They went on to say that the group believes it is now well placed to benefit from more normal conditions, having lost competitiveness after deciding not to reduce prices by as much as some of its rivals during the pandemic.

They also reported that cleaning costs and higher used car prices drove claims inflation to above the 3% to 5% target, but this has since moderated as some of these factors unwind.

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