Savings on car insurance claims during COVID-19 pegged at $35 million - report

Lady driving in car with face mask.
Claims savings that could potentially be passed to customers is lower than expected. Photo credit: Getty.

Analysis of the drop in car insurance claims during the COVID-19 lockdown indicates that insurance companies will be around $35 million better off. 

The savings come as a result of Kiwis following instructions to stay home and save lives. With driving to work, school and recreational activities off the agenda, fewer accidents – and car insurance claims – are a small silver lining of the pandemic.

Insurance Council of New Zealand chief executive, Tim Grafton, said that despite initial speculation that savings would be closer to $100 million, an independent report by actuarial firm Finity Consulting pegs that figure at 65 percent less.

"Looking at reduced traffic volumes, they believe there may be up to an 80 percent reduction in collision claims frequency," Grafton said.

The analysis, which used "historical outcomes" to get a picture of traffic volumes and the number of accident claims, calculated claim savings at a much lower $35 million. Larger claims, supply chain constraints, inflation and exchange rates could cause that amount to drop further. 

"Because cars haven't been used, collision claims are down, but other claims [e.g.] theft, vandalism - and some collision claims [from essential workers] are still happening," an ICNZ spokesperson added.

Insurance companies who are ICNZ members had agreed to ten principles to help customers through the pandemic, which include responding "flexibly and responsibly to those in genuine financial hardship."

Examples of options for cash-strapped customers include flexible payments such as temporarily freezing premiums, changing the excess amount, or changing cover if a vehicle isn’t in use.  

"Each insurer has different customers with different needs: how they apply those support measures differs," an ICNZ spokesperson added.

Where possible, after the scale of claims savings could be assessed, insurers could offer premium rebates.

"ICNZ members are already taking steps to support their customers, and to refund those premiums where possible."

Insurance companies such as Tower have responded to the pandemic by committing to pass on savings to customers by the end of May.

"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, Tower CEO Richard Harding said.

On April 16, Suncorp and AA Insurance announced a $4 million customer hardship fund which would be used to provide a range of options to help customers get through to the other side. 

People facing financial difficulty are advised to talk to their insurer, broker or financial adviser to discuss options that meet their needs.

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