COVID-19 & NZ personal motor insurance
Latest insights
The COVID-19 lockdown restrictions mean that there is significantly less traffic on the roads, which will result in fewer motor claims and other changes to the motor insurance landscape.
Traffic volume & collision claims
Urban traffic volumes have fallen by approximately 75% for light vehicles since New Zealand went into Alert Level 4 on March 26[1]. Congestion monitoring websites show a similar reduction[2].
International reactions
This reduction may be offset by several factors, including: an increase in average claims size, supply chain constraints, inflation and exchange rate impacts. Other perils, such as theft, may see a smaller decrease than collision claims. Therefore we would expect the total impact on claims to be less than 80%. As an industry, we estimate savings on personal motor claims during the four week lockdown will amount to approximately $35 million.
Internationally, some motor insurers are returning parts of the premium to customers to account for the lower levels of risk to which they are exposed.
Youi in Australia is running an opt-in scheme to return 15% of monthly premium across a three month period.
In the US, at least 20 insurers are offering some degree of refund, typically between 15% and 25% of the premium for the affected period.
In France, the insurer MAIF is returning €30 per vehicle.
In the Hubei province of China, the Insurance Industry Association has required insurers to extend their motor policies by the period of the lockdown.
The media is increasing pressure on NZ insurers to respond similarly. AA Insurance has recently announced its intention to refund premiums when the impact on its claims outcomes is clearer.
Additional impacts
As the economy slows down, we also anticipate a slowing in new business volumes and reductions in coverage. Initial data indicates New Zealanders are purchasing fewer new vehicles, with a reduction of 35.7% in new passenger car sales year on year[3]. It’s reasonable to expect this trend will continue in coming months.
The many customers that have experienced financial hardship due to the global pandemic would welcome premium relief. However, it is essential to consider this approach within the context of a weaker economic outlook, long-term financial stability and in consultation with the relevant regulatory bodies.
We will continue to monitor and report on changes in claims patterns as further data emerges. The implications of the pandemic are widespread, and we will share how these impact motor insurance as new information becomes available.
References
[1] See https://www.nzta.govt.nz/ for more details.
[2] Congestion indicates the amount of extra time required to complete a trip, compared to an uncongested baseline. See tomtom.com for more details.
[3] See https://www.mia.org.nz/ for more details.