Here we explore how COVID-19 has affected the auto insurance industry and what the response has been.
The coronavirus pandemic has caused major disruption to industries across the globe, and auto insurance is no exception. With car and GAP insurance companies seeing fewer claims, supply chain disruption and commercial vehicle use soar, they’ll need to adapt their operations and product offering to suit. Here we explore how COVID-19 has affected the auto insurance industry and what the response has been.
Less driving = refunds and rate reductions
The nationwide restrictions have meant millions of people have rarely left their home this year. With many shielding or spending weeks or even months working from home, the number of cars on the road has reduced massively. For insurers, this has meant a substantial drop in the number of claims. In fact, The Guardian recently reported that “the number of new motor insurance claims fell to 324,000 between April and June, down 48% from 678,000 between January and March”. For this reason, many insurance companies issued refunds or vouchers to their customers, while others have implemented rate decreases.
Disrupted supply chains mean disrupted repairs
While insurance claims may have fallen this year, for those that did need to claim – it’s not necessarily been smooth sailing. The automotive supply chain has seen disruption due to COVID-19, which has made it trickier to organise repairs. With garages closed for part of the year and supply of parts disrupted, it’s likely that getting vehicles fixed has taken longer on average than pre-pandemic. Plus, if companies struggle to get parts from their usual suppliers, they may face higher costs to source them elsewhere.
Use of vehicles for commercial reasons rises
It’s fair to say that consumer and driver habits have changed due to the pandemic. Many people have stopped nipping to the shops to pick up what they need – instead, turning their attention to online retailers that deliver items straight to their doorstep. This is not only the case for the retail industry – but the hospitality trade too, as restaurants are relying on takeout and delivery services, rather than sit-down diners. This means that use of commercial vehicles is likely to have risen, as well as use of private cars for commercial reasons. Insurance companies may need to extend their product offering to provide cover to customers for these types of vehicle use.
These are just some of the ways that the auto insurance industry has been impacted by the coronavirus pandemic. While we may be able to understand the immediate and short-term responses today, the long-term affects of COVID-19 on the industry are yet to be seen.