Fewer private cars being driven during commuting hours would also mean a reduced need for insurance cover. Picture: DENIS DROPPA
Fewer private cars being driven during commuting hours would also mean a reduced need for insurance cover. Picture: DENIS DROPPA

The coronavirus outbreak could cause a shake-up in the car insurance industry as a budding work-from-home ethos potentially leads to fewer vehicles on the road.

Ernest North, co-founder at Naked Insurance, believes that many local companies will be more open to flexible work-from-home arrangements, resulting in fewer private cars being driven during commuting hours, along with a reduced need for insurance cover.

Insurers with lean business models and more flexible products will be best placed to thrive in this new environment, he says.

“We can expect physical distancing measures to last for months beyond the end of the lockdown and people who can work from home may be encouraged to do so for a while yet,” says North.

“Once people are used to working from home and companies have made the technology investments to support a remote workforce, it remains to be seen if things will ever return to the way they were before we’d heard of Covid-19.”

He quoted an international Gartner study about Covid-19’s impact in which almost a quarter of responding companies said they would move at least 20% of their on-site employees to remote work permanently.

If just a quarter of companies allow a quarter of their people to come in twice a week rather than every day, it could have a significant impact on car ownership, traffic and car insurance actuarial models.

“We could see some households question whether their insurance cover meets their needs when they rarely use one of the cars parked in the garage.”

The growing popularity of ride-hailing services like Uber and Bolt is already raising questions about the future of car ownership and driving, he said. Renting a car for occasional long trips and Ubering for short commutes can be cheaper than owning a car with its associated costs including instalments, insurance, maintenance, petrol and depreciation.

“That debate may take on a new angle if more people start working from home. The myth that everybody has to be in the office from 8-5 has been busted and many companies will embrace remote working in the future,” says North.

“With connectivity and digital tools improving all the time, we could soon live in a world where people with traditional office jobs only drive every second or third day.

“Perhaps what we’ll see in this environment is that people will trade more expensive and luxurious vehicles down for more cost-effective alternatives rather than completely getting rid of a second car.”

A number of local insurance companies have reduced their premiums during the lockdown due to the reduced risk of vehicles being crashed.

Outsurance announced a 15% reduction in its existing car insurance policies for May, MiWay reduced its April premiums by 10%, Discovery Insure discounted premiums by between 15% and 25% (mileage dependent) and Standard Bank Insure will refund its clients 25% of their April premiums when the lockdown ends.

Naked’s CoverPause allows clients, by means of an app, to save up to 90% of their normal premiums by pausing the accident portion of their cover and downgrading to stationary cover on the days they’re not driving.

However, many insurers still aren’t offering across-the-board premium relief.