Despite the FCA introducing new pricing rules to protect consumers, the insurance industry reaping £3.3bn in profits is the ‘beneficiary’ from in the drop off in motor claims, says executive director

Motor injury claims reported to the government’s Compensation Recovery Unit (CRU) dropped by 19.6% in 2021 – down from 495,373 in 2020 to 398,051 last year, according to official figures published in response to a Freedom of Information request from the Association of Consumer Support Organisations (ACSO).

Between October and December 2021 specifically, motor claims decreased by nearly 30% – from 139,748 in 2020 down to 98,774 in 2021.

ACSO executive director Matthew Maxwell Scott said: “From the pre-pandemic mark of 653,893 claims in 2019, the incidence of motor injury claims has plummeted by a quarter of a million since, a drop of just under 40% in three years.

“That is an astonishing reduction and will have had a significant impact on the amount of injury claims costs paid out by insurers.

“That is why it is so disappointing that consumers have received so little benefit. The fall in claims has not been mirrored by a similar drop in the cost of car insurance and we’re years away from being able to know whether insurers have made good on their promise to the government to hand back £35 in premiums to [individual] motorists following the whiplash reforms.”

Lack of insurer response

According to the Profiting from Pandemic Premiums report, published by economics consultancy Pragmatix Advisory in October 2021, insurers gained £118 per policy after the fall in motor claims arising as a result of the Covid-19 pandemic, boosting insurers’ profits by £3.3bn.

Maxwell Scott continued: “The government has undoubtedly achieved its policy aim of reducing the number of claims, but the beneficiary is the insurance industry, which has reaped £3.3bn of benefit from its customers.

“As the cost of living soars, it is a nonsense that insurers should hold onto these excess profits without giving hard-pressed motorists a financial break, especially as the government’s own figures confirm a big drop in claims last year.”