Military personnel will be able to keep their motor insurance no claims bonus for up to three years and not pay cancellation fees if they are posted overseas at short notice, the Ministry of Defence (MoD) has said.
The move is in response to a situation in which some members of the Armed Forces deployed overseas have been losing their no claims discounts when they return to the UK.
This has meant meant that experienced drivers who have never been involved in an accident have ended up paying the same high premiums as newly qualified drivers. They have also faced cancellation fees when posted overseas at short notice.
The MoD said service personnel and their families will no longer have to face these additional costs from Saturday - Armed Forces Day - following commitments from the UK's biggest insurers and brokers, representing 86% of Britain's insurance market.
It said the move will benefit almost 265,000 people in the UK and abroad.
Defence Secretary Michael Fallon said: "When our Armed Forces are posted overseas to protect our country they can lose out from the discounts the rest of us take for granted.
"This is a welcome move from the leading insurers to help them get a fair deal. I look forward to further pledges from businesses to support the Armed Forces Covenant."
The change follows an Armed Forces Covenant round table in Downing Street in January involving defence ministers and representatives from the Association of British Insurers (ABI) and the British Insurance Brokers' Association (BIBA).
The MoD said the meeting discussed a range of measures to help service personnel and their families, including the difficulty recognising the postcodes of UK military bases abroad, the effect on credit history caused by the time spent serving abroad, and the difficulties when applying for products like mortgages and bank accounts.
James Dalton, Director of General Insurance Policy at the ABI, said: "People in the Armed Forces make a unique pledge to serve their country. UK insurers recognise this and have committed to allowing them flexibility with their motor insurance when they are posted abroad."
Graeme Trudgill, Executive Director at BIBA, said: "We are delighted that our members are able to provide some additional flexibility to our Armed Forces. Not all insurers are able to provide the necessary features required for service personnel and clear signposting to specialist brokers who are able to provide the right level of cover will improve access.
"In addition to the commitment to the MoD, we do have members that can supply policies specifically tailored to serving members of the Armed Forces including 'laid up' motor cover when personnel are on deployment; full motor or home cover when 'on base'; business driving use to enable personnel to visit more than one military base for duty purposes; and providing cover when personnel are based overseas."
:: Armed Forces personnel and their families can find out which insurers have signed up to this commitment by visiting the Armed Forces Covenant website: http://www.armedforcescovenant.gov.uk/deals-on-wheels or ABI's website: https://www.abi.org.uk/Insurance-and-savings/Products/Motor-insurance/Armed-forces. They can also call the British Insurance Brokers' Association on 0370 9501790 or can contact insurance companies individually.