Shifting consumer trends brought about by lockdown makes predicting claims cost and frequency more difficult

Motor claims frequency and cost are on the rise, but are yet to return to pre-Covid levels, according to Admiral chief executive David Stevens.

Speaking on the day the insurer released a bumper set of results, including a big rise in pre-tax profits, Stevens said the situation is ”really opaque” at the moment.

He continued: “We expect accidental damage to be in the mid single digits, but there’s a lot of noise that makes it hard to know for sure until the year ends.”

Prior to lockdown, Stevens said the business noted that elevated claims costs seen in 2018 and 2019 were returning to normal.

During lockdown, however, costs rose due to garages being closed, cars being written off that could have been repaired and there were longer hire car durations.

His views were echoed by incoming chief executive Milena Mondini de Focatiis

Referring to trends in claim frequency, she said: ”The future is hard to predict because there are conflicting trends.

”On one side, there are reasons for people to drive less and more ’smart’, and there is also an increase in unemployment and recessionary factors, which can also drive down frequency.

”On the other side, there is a bit of a fear of public transport, so people are using their cars more for health reasons.

”We need to wait a few months to see what the new normal will be in terms of living habits to understand the trends better.”

Stevens added that there had been a 3% to 4% increase in claims just in the past week alone as people start to behave “more normally”.

Rate increases

Speaking on rates, Stevens said: ”It’s a difficult call to predict whether it will go all the way back to normal levels, or because of people working from home, or because of the recession, it stops short of pre-Covid levels.

”We have to make these considerations when we set rates for the next 12 months.

”Our rates have come down since lockdown started.

”We find ourselves top of price comparison sites a bit more often than we were at the beginning of lockdown, which suggests we’ve taken our rates down a bit more than our competitors.

”If frequency returns quickly to normal levels and the cost of claims goes up, then I see premiums going up in the second half of the year.

”But if they return more gradually, then they probably won’t.”