The spread of COVID-19 will hit the UK motor insurance market hard, with new car registrations in March 2020 down in excess of 40% when compared with the same period last year.
According to the Society for Motor Manufacturers and Traders, the number of new car registrations in March 2020 was 200,000 less than in March 2019. GlobalData research indicates that such a reduction alone would result in the loss of approximately £98m ($120m) in new premiums. Given that the UK is in the earlier stages of social distancing measures compared to other countries, this indicates a challenging future for the UK motor insurance market.
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Social distancing measures, which will inevitably result in a stall in the number of new car sales until measures are relaxed, are not the only challenge facing the insurance industry. With all the major car factories in the UK currently suspending work and with no date in sight as to when production will resume, the contraction in demand for new policies should be expected to continue for some time.
The fall in new vehicle registrations will also have a significant impact on the composition of the motor parc in the UK in terms of the prevalence of vehicle safety technology. With many safety features incorporated as standard on new vehicles, the fall in their numbers will slow the rollout of such technology.
GlobalData’s UK Insurance Consumer Survey indicates that vehicle safety features such as anti-collision alerts, automatic emergency braking, and lane departure warning systems increased in popularity by 5.9 percentage points (pp), 4.2pp, and 7.1pp respectively between 2018 and 2019.
With such a significant reduction in new vehicle registrations in 2020, it is expected that the popularity of this technology will grow at a far slower rate this year. However, this could help mitigate the impact on total market gross written premiums, offsetting the declining demand for policies due to higher premiums as an increasing number of older vehicles remain on the UK’s roads.
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