It’s fair to say that in the current climate high levels of trust with insurers is not exactly on the tip of the vast majority of customers’ tongues. I see the opportunity for insurers to show great attitudes and behaviours in the commercial motor market. But while I see it, do insurers?
Let’s step back three months. I would have been talking about insurers looking to limit exposure to the transport sector on the grounds that they can’t get enough premium from customers to cover the costs of catastrophic personal injury claims. Claims frequency would have been in there as would vehicle repair costs, the cost of reinsurance and the Motor Insurers’ Bureau levy. A simple conclusion – double figure rate increases and restricted markets.
What Impact is Coronavirus Having on the Commercial Motor Market?
Changing landscapes are a constant feature of the commercial motor market and boy have we got one right now as the world struggles with coronavirus. At Anthony Jones Insurance Brokers we are seeing plenty of examples of the re-purposing of vehicles – diversification into food distribution especially, but also a spike in demand for general goods delivery from the likes of Amazon. For most of those re-purposing their vehicles this is deemed a change in material fact because vehicles are now being used for something different. The basis of contract is very relevant. Is it on the basis of hire and reward for a third party or a move to own goods? Whatever the basis you must tell your insurance broker or insurer. This is crucial and, as with many things right now, expect this to be a “grey area”.
We are also seeing vehicles being laid up and an increase in SORN notices to take vehicles off the Motor Insurance Database (MID). For our insurer partners please be as flexible as you can be on return premiums and requests for lower cover whilst vehicles are laid up and off the roads.
How are Insurers Likely to Respond?
At face value insurers are looking at a likely short term massive reduction in vehicles on the roads and a consequent lowering of claims frequency. It feels reasonable to suggest that a 70% reduction is likely and, in fact, already here. Will insurers moderate the need for rate increases? At the time of writing this is not yet clear. I’m sure they will argue that there is uncertainty as to how long the UK will be forced to be in “lockdown”. They will say there is no need for a knee jerk reaction and that any reduction in claims frequency and costs will be reflected in motor experiences over time. I suspect we will also hear of lower investment returns with financial market volatility and impacts on Solvency 2 requirements needing to support rates in the market.
Our Appeal to Insurers
To our insurer partners we would say please be as flexible as you can be. Be understanding and supportive of customer needs in these dire times. We will remember those who are admirable in the face of adversity. Do not let our industry down.
Steve Green ACII
Chartered Insurance Broker