Industry experts debate why motor insurers should not be tarred with the same brush when it comes to consumer mistrust in the insurance sector as a result of unpaid Covid-related business interruption claims

Motor insurers’ response to the Covid-19 pandemic in supporting customers should “go a long way to minimising potential reputational damage” that resulted from the FCA’s business interruption (BI) test case, which sought to clarify policy wordings for Covid-19-related claims.

Speaking on the first day of the ABI’s virtual motor conference on 4 November, the ABI’s assistant director and head of general insurance Mark Shepherd told delegates that the positive steps taken by motor insurers – such as premium holidays and permitting changes in vehicle use – should help to insulate them from the negativity that has shrouded the industry’s reputation since BI claims began to be rejected at the start of the coronavirus national lockdown this spring.

He explained: “How motor insurance has reacted [to the Covid-19 pandemic] means we shouldn’t overplay some of the reputational issues.

“Particularly in terms of some of the initiatives around flexibility for customers, permitting changes in vehicle use, where we’ve had MOTs not being available in the previous lockdown, premium holidays, volunteer driving – there’s been a whole range of stuff that I think the industry can really draw on as really positive initiatives that they have demonstrated flexibility for customers.

“That will go a long way to minimising some of that potential reputational damage that could come from elsewhere.”

Martin Milliner, general insurance claims director at insurer LV=, added that how motor insurers implemented home working promptly following the onset of Covid-19 should also contribute to a reputational boost – he added that insurers should give themselves a “pat on the back” for this.

“The initial reaction by all insurers was quite incredible in terms of creating a response to Covid, both from a customer perspective and also our own people,” he said.

“Adapting to the new ways of working was quite phenomenally quick, not easy, but certainly effective and we can see that across the industry in our customer satisfaction or net promoter scores, which I think – for motor claims anyway – are at an all time high.

“Our reputation has taken a bit of a beating of late as an industry [but] we can’t ignore we did actually succeed and I think we should unashamedly give ourselves some praise and a pat on the back for that.”

Difficult to differentiate

However, Shepherd conceded that many consumers view insurance as one lumped-together product, rather than separated into different lines of business – this could mean that motor insurers may get splashed by some of the BI backlash and experience a resulting dip in customer trust.

He explained: “There’s clearly no doubt that Covid-19 has created some significant reputational challenges for insurance across the board and that in itself has had some knock-on effects to motor insurance, even if motor insurance as product has maybe seen less of that challenge compared to some other lines.

“Customers by and large don’t tend to differentiate between insurers. Less trust in insurance as a whole, as a result of the pandemic, will impact on all product lines, including motor to some extent.

“Where we’ve seen challenges around business interruption during the last lockdown and having cover for business interruption but that cover in many circumstances not applying, for very legitimate reasons, [customer] expectation that it would apply will have a broad effect on trust in insurance and expectations around insurance responding to customers’ needs.

“Business owners who have been badly impacted by this pandemic and the previous lockdown will also in many cases have a private motor insurance policy, may have a fleet motor insurance policy as part of their business, will have family and friends with motor insurance policies, so I think a reputational hit across the industry is likely to be seen to some extent and will feed across product lines.

“Similar examples might be true as well if there’s been a poor claims experience over a cancelled holiday in travel insurance, so I don’t think it’s possible to separate different product lines in terms of a potential reputational hit.”

Shepherd and Milliner participated in the ABI’s event as part of a panel discussion, alongside Copart UK’s managing director Jane Pocock. The session was chaired by Laura Hughes, manager, general insurance at the ABI.