The current rebates offered by motor insurance companies may not satisfy younger drivers that pay high premiums on their policies.
This is according to GlobalData insurance analyst Ben Carey-Evans, who believes although offering a rebate can give insurers “rare good PR” at the moment, a flat monetary amount doesn’t reflect the level of risk younger drivers are removing by staying at home.
“If this trend continues, there is a risk younger drivers may start to feel hard-done-by,” he says.
“They are considered to be riskier by insurers and consequently pay higher premiums.
“Their extra risk is mitigated by reduced driving, but they will receive a lower percentage of their premiums back compared to older generations.”
Giving rebates as a percentage of drivers’ premium may help insurers retain high-risk customers
GlobalData’s 2019 UK Insurance Consumer Survey found that over one in five (21.6%) motor insurance policyholders switched their accounts at their last renewal.
A further 41.3% researched prices before renewing with the same insurer – which Carey-Evans believes meant they were open to switching.
Only 25.4% renewed automatically, which he said shows insurers are always “somewhat at risk” of losing these customers and their monthly premiums.
“If and when other insurers follow suit as the lockdown continues, it may be best to consider offering refunds as a percentage of premiums, so everyone is getting a fair deal,” Carey-Evans added.
“A flat fee of around £30 ($37) may not be enough to encourage young drivers with premiums in excess of £1,000 ($1,200) per year to renew their policies.”