Car insurance costs to drop by £27 a year because of lockdowns

Car insurance premiums are expected to fall by 6% this year because people have been driving less over lockdown.

Restrictions during the pandemic have led to a 20% fall in vehicle usage, with fewer drivers commuting to work or travelling afar.

This led to a 28% drop in claims and with many people still waiting for orders to return to the office, roads could remain quieter for some time.

EY’s latest motor insurance results have shown people will be able to save £27 on their policies this year.

On top of this, premiums could go down even more thanks to reforms that came into force on May 31, making it harder for whiplash claimants to get insurers to cover their legal costs.

UK General Insurance Market Lead at EY, Tony Sault, said: ‘The drop in claims last year meant insurers were able to pass on savings to their customers through reduced premiums in Q1 2021.

‘As commuting patterns change, perhaps for good, we expect the downward shift in car usage and claims to continue – albeit not to the level seen in lockdown.

‘We also expect lower premium rates to continue for the rest of this year as insurers price in these behavioural changes as well as the new rules on whiplash claims and focus heavily on retaining customers ahead of the Financial Conduct Authority (FCA) pricing reforms.’

The Civil Liability Act 2018 and the Whiplash Injury Regulations came into force in England and Wales on 31 May this year.

Previously if you suffered from whiplash and made a successful claim of more than £1,000, the insurrer of the vehicle at fault will also have to cover legal costs.

But the change in the law means this limit has been increased to £5,000, with drivers having the option to settle smaller claims without lawyers through an online portal.

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