As expected, New Zealand's 'stay home' orders during the Covid-19 lockdown period resulted in a lot fewer people using their cars, meaning that the road toll dropped significantly, along with total car collisions.
Because of this, car insurance claims dropped dramatically, and Tower, one of New Zealand's largest providers has decided to refund customers a percentage of what they paid during the lockdown period.
Tower CEO, Richard Harding, recently revealed that it would be refunding customers $7.2 million for what was paid during the level three and four periods.
“We’re a Kiwi company and look after our customers, so after seeing a significant reduction in claims, we knew the right thing to do was pass these lower costs on.
“For most customers, the refund will equate to around 40% to 45% of the car insurance premiums they paid between 24 March and 13 May 2020.
“We had planned to make refunds by the end of May, but because we also saw lower claims during the level 3 three lockdown, it’s taken us a little longer to calculate, so refunds will now be paid from late June."
Mr. Harding also explained how all insurers need to be transparent with how the windfall gain from the Covid-19 is handled.
"Not making a windfall gain and refunding customers is the right thing to do, and while the lockdown could cause supply chain constraints and a slight uplift in claims expenses over the short term, the significant reduction in claims costs should be passed on."
At the start of the lockdown period, AA Insurance revealed that a $2 million fund was set aside to help vulnerable customers, and freeze car insurance premiums. Other providers followed AA's lead and announced packages to help customers experiencing financial hardship.
Tower refund details
- Refunds will be paid to all customers who held car insurance with Tower from 24 March 2020 to 13 May 2020, inclusive
- Refunds will be calculated based on individual customers’ premiums paid, excluding taxes, fees and levies
- Refunds will be prorated for customers who cancelled or joined Tower during the lockdown period
- Tower will communicate directly with customers advising on how the refund will be paid, with refunds starting to be paid in late June
- The total cost of the refund is offset by the reduced claims cost and will result in a neutral financial impact to Tower