Insurance costs and benefits must be clearer – Consumer NZ

Insurance costs and benefits must be clearer – Consumer NZ | Insurance Business New Zealand

Insurance costs and benefits must be clearer – Consumer NZ

Consumer NZ has urged the insurance industry to provide better information to its customers – allowing them to understand changes in premium charges and benefits from year to year.

AA Insurance is at the forefront of this, according to a report by Stuff, with the insurer announcing that, by next year, customers will be able access a breakdown of what they paid for the past year’s cover on the following year’s bill. This makes it easier to compare the value of premiums paid in consecutive years.

Government data shows that in the first three quarters of 2019, house insurance premiums increased by 7.6% nationwide. In 2018, premiums rose by 16%.

“Despite being introduced into the UK market several years ago, and Australia in 2018, like-for-like comparison of premiums, or annualised premiums, haven’t yet been made available by the New Zealand general insurance industry,” Chris Curtin, AA Insurance chief executive, was quoted as saying in the report. He added that the company was planning to debut the initiative in March, but was delayed due to COVID-19.

Jessica Wilson, head of research at Consumer NZ, said that the rest of the industry should follow AA Insurance’s suit.

“It’s one of the changes we’ve called for so consumers have better information about the cost of insurance,” she told Stuff.

“When renewal notices include details of the previous year’s premium, it also prompts customers to shop around or haggle with their insurer to get a better deal.”

According to Consumer NZ’s research, 84% of respondents said it would be useful if the renewal notice detailed premiums paid in the previous year, so they could track any changes.

Wilson said that consumers should also gain access to more information about their insurance, such as claims ratios, which insurers aren’t required to disclose. She cited the case of credit card repayment insurance, which was sold by banks for many years. The insurance policies were of low value to consumers, and some consumers ended up getting back around 11c out of each dollar paid in premiums.

“If insurers had been required to disclose the claims ratio, it would have made of the product’s flaws much more obvious to consumers,” said Wilson. “Requiring insurers to report on other measures – such as their average claim processing time – would also help consumers make informed choices about insurance products.”

Meanwhile, Insurance Council of New Zealand CEO Tim Grafton said that greater consumer understanding of insurance was one of the industry’s priorities.

“From including previous year’s premiums to the use of plain English to make documents easier to understand,” he said. “These are great steps for consumers which we know all our members are currently working on.”