Your journey to travel insurance refund

Q I bought annual travel insurance at the beginning of the year, before the coronavirus pandemic started affecting travel. Can I get my premiums back?

A With the government stating that it doesn’t expect people to be going on holiday this summer, and the financial impact of the pandemic hitting everybody, it is sensible to look at your outgoings and see whether you can get some money back.

This is certainly true for your insurance policies, the terms on which you bought them may have changed radically. You may no longer be using your car for commuting, for example, or spending all your time at home changes the risk you pose in the eyes of your insurer. Some policies, like your travel cover, may be totally unusable.

Let’s start with the good news. Under new rules introduced this week by the financial watchdog, the Financial Conduct Authority, insurers must carry out a whole range of measures to treat customers fairly and support people during the crisis.

This could be in the form of reduced monthly payments, partial refunds for annual policies, waiving cancellation fees and cancelling interest on missed payments.

You could even be offered a payment holiday on premiums for up to three months (or longer, should your situation demand it).

These rules should cover all types of “general” insurance, applying to car, home, travel, pet and mobile phone insurance, as well as “protection” cover, such as life insurance, income protection and critical illness cover. So now is the time to see where you could make some savings.

In the case of your travel insurance, contact your insurer and tell them you want to cancel your policy. You should receive a pro-rata refund for the months remaining on your policy, though your insurer may backdate this to the time that the government issued advice against any travel (only a few insurers have done this, to my knowledge).

Contacting them may take time – insurers are inundated with claims and queries at the moment, from people looking to make claims for holidays cancelled and bookings unfulfilled. I’d recommend some patience and willpower for hold music, but going through live chat can sometimes prove a bit swifter.

We’ve begun to see car insurers being proactive and offering refunds directly to customers. Admiral is refunding £25 to all of its motor insurance customers at the end of May. LV has set aside £30 million to refund car and motorbike insurance customers between £20 and £50 if they can prove they are suffering hardship as a result of the crisis.

Some 11 other major insurers told Which? that they are slashing their premiums for new and renewing customers due to the fact that they will pay out less in claims.

Some are offering other benefits. This week, NFU Mutual announced that it would be adding breakdown cover to 600,000 of its customers’ policies. If you’re not insured with either of these firms, there are steps you can take to cut your costs, such as reducing your annual mileage, removing second drivers with whom you are not living, switching from comprehensive cover to fire and theft (but only if you’re not driving).

There’s a way of avoiding car insurance altogether, but it’s quite an extreme measure. If you’re adamant you will not be driving, you could take your car off the road by getting a statutory off-road notification.

By doing so, you can cancel your car insurance. However, this is not a decision to be taken lightly – you cannot drive at all, even for short trips.

This will only be possible if you keep your car on your drive or in a garage, as you won’t be able to leave it on any public road, and you won’t have cover if something happens to it while it’s not being used. When you want to drive again, you’ll have to re-register it and buy a new car insurance policy.

You should expect more changes coming to the policies that you own. The regulator has told insurers that they need their products to reflect the changes brought about by the pandemic.

Car insurance should be cheaper because people are driving less, the regulator said, and they also cited products such as private medical cover where certain benefits were no longer available, or boiler cover where an engineer couldn’t make a visit because of social distancing.

These new measures should be introduced by the end of May.

Gareth Shaw is Head of Money at Which?