IAG urged to refund motor premiums

IAG urged to refund motor premiums | Insurance Business New Zealand

IAG urged to refund motor premiums

IAG has been urged to follow the lead of Tower and AA Insurance, and to offer premium rebates to its motor customers following a significant drop-off in claims during the lockdown period.

Claims involving road traffic accidents and thefts decreased dramatically over Alert Levels 3 and 4, saving insurers an estimated 70% in claims. Tower and AA Insurance have acknowledged the ‘windfall’ of unused claim payout money, and have both pledged to return premiums to customers for the lockdown period.

IAG, which accounts for around 45% of the insurance market in New Zealand, has not yet made a direct rebate pledge, though an April statement said that “any additional benefits arising from the COVID-19 lockdown will ultimately flow through to customers.”

Read more: Three NZ insurers commit to premium refunds

Tower Insurance CEO Richard Harding (pictured) says customers should be asking IAG about a refund, citing its own move to return $7.2 million to its customers.

“We saw a significant reduction in motor claims over lockdown because no-one was driving - and as a result we spoke with the board, and told them we were likely to see a significant windfall,” Harding told Insurance Business.

“The board came back and told us it would be the right thing to do to refund the premium for that period, and recognise the fact that we’ve had almost no claims.

“That may be $30-$40 per person depending on the policy, but it’s a positive intention to be able to say to customers that we’re not going to take money from you unnecessarily, and we respect that you’ve been paying for a service that you haven’t been able to use, so we’ll refund as much of that as we can.”

Harding says that despite a 70-80% drop in new business over the lockdown period, claims savings were still greater than the hit to new business - therefore, the refund did not ultimately impact shareholder profitability.

Read more: Tower Insurance to refund COVID-19 savings by end of May

IAG’s customer support measures are currently focused on premium deferrals and reductions, but have come under increased pressure from customers and insurers to consider direct refunds.

“From our point of view, the right thing to do is to give customers that money back at the point in time when they need it the most,” Harding said.

“Lots of people are losing jobs and work hours, and, on balance, we aren’t getting back more than the amount that wasn’t used. Shareholder profitability hasn’t been impacted.”

“It was the right thing to do from a customer and conduct point of view,” he added.

“If you think about it, Tower is 8% of the market - but IAG is 45% of the market, so I’d be interested to know why they aren’t refunding $50-$60 million to their customers. A lot of people have been shouting about Air New Zealand, but they should be shouting about IAG.”