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Car insurance during lockdown: can you get a refund, payment holiday or cheaper premium?

Admiral and LV are offering a refund to policy holders

Car insurance during lockdown: can you get a refund, payment holiday or cheaper premium?

LV has joined Admiral in offering partial refunds to its car insurance customers, due to the change in driver behaviour under lockdown.

With people only leaving the house for essential reasons, there have been far fewer vehicles on the road since March.

Admiral expects this to lead to fewer claims, so it’s passing on the money to its customers that it would have used for payouts. LV is now doing the same, though its refunds won’t be automatic.

More than 20 major car insurers in the US are doing the same, giving out billions of dollars of refunds, ranging from 15% to 25%, on premiums for April and May. Some are coming as cheques in the post, and others are coming as credits towards future payments.

UK car insurers are also facing calls to give refunds, but so far only Admiral and LV have proactively taken this step.

Despite this, you might still be able to get a refund or reduced premium from your insurer if you get in touch with it.

Here, Which? looks at whether you could be entitled to a car insurance refund and how to get one if you are.


Why are car insurers refunding customers?

Insurers take a number of factors into account when calculating your premium. One of these is the mileage you drive.

Under lockdown, you might be driving a lot less than you usually do, especially if you used to drive to work and you now work from home, are furloughed or unemployed.

If your mileage had been lower when you first took out your car insurance policy, your premium may well have been cheaper.

According to data from the government’s daily coronavirus briefings, the number of vehicles on the road has decreased by more than 60% since 16 March 2020.

Source: UK Government

Naturally, this could lead to far fewer claims for car accidents, potentially saving insurers money on payouts.

Pay-as-you-go insurer Cuvva estimates that the UK insurance industry will make an extra £1bn profit if car insurance claims drop by 50% over a three-month lockdown.

Insurers in the US have acknowledged that they stand to make large savings, and many are proactively passing part of these on to consumers. Admiral in the UK is doing the same, but so far no other insurers have taken this approach.

Can I get a car insurance refund?

You don’t have to wait for your insurer to refund you to lower your car insurance premium. Even if you’re not an Admiral or LV customer, your insurer will calculate a new premium for you if you update it with your current driving behaviour. See below for more details.

LV refunds

LV car and motorbike customers will reportedly be eligible for a refund of between £20 and £50 due to the savings it expects to make as a result of fewer claims.

It has earmarked £30m to the scheme, but unlike Admiral (see below) refunds won’t be automatic.

Instead, customers will need to contact LV and prove they’ve suffered financially as a result of coronavirus.

You might qualify if:

  • You’ve yet to receive the 80% furlough payment
  • You are self-employed and are unable to work or trade because of coronavirus, and haven’t received the 80% government grant
  • You were made unemployed at any point after 1 March 2020.

The refunds are also only available to direct car and motorbike customers. This includes those who bought via a comparison site but excludes customers who bought cover via a broker.

This measure is in addition to LV  reducing premiums by temporarily changing the cover customers have. It has also waived administration and cancellation fees, as well as excess payments on claims by those who are hardest hit financially.

Admiral refunds

Admiral refunds will be automatically credited at the end of May.

Cristina Nestares, chief executive of UK insurance at Admiral, said: ‘This is an unprecedented time when people across the country are driving significantly less than before the lockdown, and we expect this to lead to a fall in the number of claims we are seeing.

‘We want to give the money we would have used to pay these claims back to our loyal customers in this difficult time.’

A spokesperson for Admiral neither ruled out nor committed to offering further refund payments in the future, but said the insurer will ‘continue to reflect changes to claims experience in our motor prices’.

However, pay-per-mile insurer By Miles says this refund is a step in the right direction, but that £25 doesn’t go far enough. 

According to its calculations, UK drivers could be up to £35 out of pocket over a two-month lockdown for each car they own. This is based on By Miles’ own pricing data set against data from the Department for Transport and average premiums as calculated by the ABI.

Gareth Shaw, head of money at Which?, said: ‘People will remember how businesses treated them during this crisis, and Admiral’s decision to provide partial refunds to all of its car and van policyholders will certainly be welcomed by customers experiencing unforeseen pressure on their finances.

‘Firms that act fairly now may see that they are rewarded in the future, and we encourage all other car insurers to follow Admiral’s lead.’

Are other UK insurers refunding customers?

Which? asked 11 of the UK’s biggest car insurers whether they were planning to reimburse customers for part of their premiums, considering that millions of them will have changed their behaviour.

Every insurer that responded said they did have measures in place to help customers through the coronavirus crisis, but most of these required the customer to get in touch and change details of their policy themselves, such as lowering their annual mileage.

Insurers usually charge fees for doing this, but several told us they have waived these fees for the time being.

Notably, Admiral is still charging customers to change their details – £9.50 online or £25 over the phone. This means that although changing your details could potentially get you a bigger refund, you’d have to forfeit some or all of your £25 payment in the process.

The table below has a summary of what each insurer told us.

Insurer Reclaiming premiums Additional help
Admiral – Automatically refunding £25 for each vehicle
– Customers can change policy details, but this costs £9.50 online or £25 by phone
– Reduced pricing to reflect the current situation
Ageas – Reduced pricing to reflect the current situation
– Enhanced cover for NHS and key workers
Aviva – Customers can adjust mileage for free online or via the app. Also free over the phone but only if you can’t use the app or website – Providing up to three months of payment deferrals for those suffering financial hardship
– Enhanced coverage for NHS workers
Axa – Monthly mileage can be reduced to reduce premium via online accounts. – Flexible repayment options for customers experiencing financial difficulty
– Late payments will be interest-free
Direct Line – Can change mileage with virtual assistant for a potential refund. Adjustments are fee-free
Hastings – Customers can get in touch to report changed circumstances, and premiums will be recalculated with the usual fees waived – Prices have been reduced
LV

– Encouraging customers to contact it to temporarily change cover to reduce premiums

-Will pay £20-£50 to customers that get in touch and have suffered financially because of coronavirus

– Where possible, not charging for admin or cancellations and waiving excesses
– Enhancing cover for key workers and NHS staff
More Than – Customers can make fee-free changes to policy details – Enhanced coverage for NHS workers
– Interest-free payment deferrals can be arranged for customers suffering financial hardship
NFU Mutual – Customers can make free mid-term adjustments to change circumstances, which can reduce premiums -NFU Mutual is giving its 600,000 car and small van customers complimentary or upgraded access to RAC national recovery and home breakdown cover.  Those with NFU Mutual’s Private Car or Light Goods Vehicle insurance will get the cover for three months between 22 May 2020 until 31 August 2020. It also applies to new customers who take out NFU Mutual’s insurance before the offer ends.

 

After we spoke to these insurers, the FCA told insurers they must offer general insurance customers refunds, reduced cover and payment holidays to reflect the ways coronavirus has changed the market.

How can I lower my insurance premium?

While most of the insurers we spoke to aren’t proactively refunding customers, each one was willing to work with customers to reduce their premiums if they got in touch, and in many cases this won’t cost you a penny.

If you have an online account with your insurer, you might be able to log in and make changes there. Otherwise, you can get in touch over the phone or via its website.

There are a few changes that you can make to your circumstances to lower your insurance premium, but make sure everything you tell your insurer is accurate, otherwise you could find yourself underinsured if you’re involved in an accident.

It will also be important to change your details again when lockdown restrictions lift.

Premium adjustments will usually change your monthly payments if you pay monthly, or be paid as a rebate if you pay annually.

Here are some of the key ways you could reduce your premium:

Reduce your annual mileage

Tell your insurer how much less you will be driving this year due to the crisis. Depending on how often you drive, this could already be a lot lower than usual.

Let’s say that a driver normally commutes 15 miles to a place of work on weekdays – so 30 miles per day. If this stops, over 60 days (two months of lockdown) that’s a reduction of 1,200 miles.

Remove second drivers

If one of your policy’s named drivers is no longer driving at all, let your insurer know, to get them removed.

Switch to fire and theft only

This will mean you’ll be covered if someone steals your car, but you won’t be covered to drive. You’ll need to change your cover again if you do want to make a car journey.

Declare your vehicle off-road

If you are absolutely, unquestionably not using your car at all at the moment, you can get a statutory off road notification (SORN), which will allow you to cancel your car insurance.

This should only be done if you’re certain you won’t be driving at all, even for very occasional short trips, as it’s illegal to drive without insurance. And you can only do it if you have a driveway or garage, because you won’t be able to leave your car on any public road.

You won’t be able to use your car again until you re-register it as on road and take out an insurance policy. It also won’t be insured if anything happens to it while it’s not being used – such as theft or fire.

Find more about registering a car as SORN on the government website.

Find a better deal

Depending on how much you’re currently paying, you might be able to get a cheaper deal elsewhere. Ageas says it has reduced pricing to reflect the coronavirus crisis, as does Admiral.


This story was originally published on 21 April 2020 and has been updated since then. The last update contained information on the FCA’s guidance and was published on 18 May 2020.


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