Australian-owned insurer under fire for hiking NZ car premiums

Friday, 8 May 2020

One Auckland man was told of a car insurance premium rise of $67 during alert level three (file photo).

An Australian-owned insurer is copping flak for hiking car insurance premiums for some Kiwi customers.

The increase by AMI insurance comes amid a big drop in crash claims during coronavirus lockdown.

Consumer NZ said it was hard to see any justification for the increase in some car insurance premiums.

IAG, the Australian multinational owner of AMI, said the current premium hikes experienced by customers were already in motion before the arrival of coronavirus, while some of its premiums had dropped.

Data gathered by the Reserve Bank and Financial Markets Authority revealed the worst-value personal insurance sold by banks and insurers. First published in 2020.

* Wellington's insurance shake-up: IAG's 'conservative' approach set to ripple across industry

* Premium rises of 'around $1000' for some AMI and State house insurance policyholders

The company said it is focussing on customers experiencing financial hardship through measures such as deferred premium payments for small businesses.

Customers are right to be unhappy with premium rises in the time of coronavirus, says Consumer NZ head of research Jessica Wilson.

One Auckland man, who asked not to be named, discovered during level three his car insurance would rise $67 for the period starting June 2, from $1011 to $1078.

The bulk of the increase was the AMI premium, which jumped from $793 to $849, despite his car's agreed value falling from $7500 to $6900.

The man, who feared his finances would suffer due to the global Covid-19 situation, said he was puzzled by the rise because his premiums had been trending down.

In April, AA insurance froze premiums on house, car and contents insurance and set up a $2 million hardship fund to help people struggling with paying premiums.

Tower Insurance soon followed suit in a pledge not to make a profit on car insurance from the drop in crash claims during lockdown.

Jessica Wilson, head of research at Consumer NZ, said it was hard to see any justification for increases in car insurance premiums.

“Car insurance claims have dropped dramatically as a result of the lockdown and that means insurers' costs are also down.''

IAG customers hit by the price hike were right to feel they were getting a raw deal, Wilson said.

“We think the company has made the wrong decision to increase premiums at this time.”

IAG is New Zealand's largest insurer and trades under brands including AMI, State, NZI, NAC, Lumley and Lantern.

A company spokeswoman said the premium changes experienced by some customers now were decided before the arrival of Covid-19.

There had been premium decreases as well as increases, she said.

“IAG constantly reviews its pricing to ensure customers pay a fair and appropriate amount for their insurance.”

The company's immediate focus was to support customers facing financial hardship and it had established a specialist Customer Care Team for this, the spokeswoman said.

It had a range of measures in place to support such customers including deferred premium payments for small business, different premium payment options and policy coverage changes.

“We will continue to ensure we are there for our customers through these unprecedented times.''