Comprehensive car insurance premiums fell 5% (£39) in Q2 2020, as lockdown forced drivers off the road.
The latest Confused.com and Willis Towers Watson Car Insurance Price Index put the current average cost of car insurance at £770, following a £19 (2%) decrease over the past year.
Graham Wright, UK lead of property and casualty lines for 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.”
Confused.com and Willis Towers Watson looked beyond price to both changes in the mix of types of people quoting for car insurance 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 car insurance 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 prices.
According to Willis Towers Watson, all of this reveals that while insurers took pricing action over the quarter, not all of the surface level changes in market price are necessarily exactly as they seem.
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.”
“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.”