Direct Line Sees Motor Claims Fall By £117M Amid Lockdown

By Martin Croucher
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Law360, London (August 4, 2020, 1:29 PM BST) -- Direct Line said on Tuesday that the amount it paid out on motor insurance claims fell by £117 million ($150 million) in in the first half of the year as fewer people used their cars during the nationwide coronavirus lockdown.

Payouts on net motor claims fell to £401.8 million, down from £518.7 million in the same period in 2019, the U.K.'s second-biggest motor insurer said.

The lower cost of claims helped offset £25 million it paid out to meet travel insurance claims and £10 million for business interruption from January to June this year, the company said in its financial results.

As a result, the company maintained a pre-tax profit of £236.4 million in the reporting period, down from the £261.3 million it posted in the first half of 2019.

Several insurers in the U.K.  have passed on savings to policyholders as a result of fewer car and motorbike accidents during the lockdown, with Admiral offering £110 million in one-off rebates.

Direct Line said Tuesday it had also offered refunds based on lower mileage during the period, but did not give a number for how much it had returned to its customers.

Ratings agency Moody's said Tuesday that insurer face increasing "social and political pressure" to pass on savings from claims reductions to policyholders.

"COVID-19 restrictions led to a 70% reduction in claims notifications in April, which has increased each month since then but remains below normal levels," Direct Line said in its results. "Severity was higher than usual due to a number of factors including repair capacity across the market and increased credit hire durations."

An insurance technology company, By Miles, claims that its data shows there has been a 69% drop in average miles driven across the U.K. since the start of the lockdown. Motor insurers stand to gain £1 billion from the fall in vehicle use, the company added.

But the Association of British Insurers has rejected calls for an industry-wide initiative on refunding motor premiums, saying pricing remains a matter for individual companies. 

Insurers are bracing for more car accidents later this year after lockdown eases further in the U.K., as motorists who might have become unfamiliar with their vehicles take to the roads again. A survey by car manufacturer Hyundai in June found that a fifth of U.K. motorists had struggled to get used to driving again after the lockdown.

"Considerable uncertainty remains over both the frequency and severity of accidents over the remainder of the year as customer behavior changes," Direct Line added on Tuesday.

--Editing by Ed Harris.

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