Fewer car claims saves insurers $35m
Insurance companies are on course to save about $35 million on payouts for motor vehicles as the coronavirus lockdown has curtailed people’s driving.
AA Insurance has announced it will freeze car insurance premiums as a result of the Covid-19 pandemic and will consider reducing them when the financial impact of the crisis is clearer. Tower Insurance is also making refunds to customers as a result of fewer claims during this period.
Consumer New Zealand is urging all insurance businesses to follow the lead of companies in the US where premiums for vehicle policies have been cut by up to 25 per cent.
Insurance Council chief executive Tim Grafton estimates claims for motor vehicles may have dropped by up to 90 per cent during the lockdown period, saving the insurance industry about $35m. Initial reprts had set the figure as high as $100m.
Grafton adds while it may sound like a lot of money, it was about the same amount the industry paid out on cars from one freak storm in 2019.
“We had a hailstorm last November, it only hit Timaru, but the thick end of $100 million on motor vehicle claims resulted from that one event,” he says.
Grafton also explains insurance companies have seen their incomes suffer a downturn with a lack of new customers as people have mostly stopped buying cars and homes.
AA Insurance says it will pass on some of the savings from fewer car insurance claims during March and April this year to consumers.
It is freezing premium increases for personal car, home and contents products and has created a $2m fund to help customers in “genuine hardship”.
The company says once the impact of the various Covid-19 alert levels on its claim costs is clearer, it will also consider premium reductions for car insurance policies.
“This is about fairness and doing the right thing by our customers and the communities we live in,” says Chris Curtin, pictured above, chief executive of AA Insurance. “We are mindful people are driving less which is reflected in fewer claims being made. We do not intend to take advantage of this at the expense of our customers.”
Tower Insurance is also planning to pass on any savings it makes due to Covid-19 to car insurance customers with refunds to be made by the end of May 2020.
Chief executive Richard Harding says the company will not profit from the outbreak and will make further refunds if needed.
“We know that people are driving less, and this is resulting in lower claims, so any savings we make will be passed back to our customers,” he explains. “In the meantime, any customers experiencing financial hardship should call us. We have a specialist team on hand and a range of options to support customers and help reduce any financial pressure.”
