Insurers face increasing pressure to cut premiums for motorists during the pandemic as fewer drivers hit the road.

Recent data from Apple showed the number of driver requests using its Maps function dropped 73 per cent below normal levels during the height of the lockdown in mid-April.

States including New South Wales and Queensland are continuing to restrict travel until at least the beginning of June.

But despite the level of car usage declining through the coronavirus crisis, most insurers have only offered hardship measures in the form of payment moratoriums or extensions.

In fact, only seven insurers have announced policy discounts for customers in coronavirus-related hardship:

• The Suncorp Group (including Suncorp Bank and its insurance affiliates GIO, AAMI and Apia) is offering discounts of up to 20 per cent on their policy, or a three-month waiver on customers’ premiums
• Youi passed on the windfall from an estimated 40 per cent drop in claims to its customers in the form of a 15 per cent three-month discount for new and existing car insurance customers
• QBE pledged one-off $50 gift cards for eligible customers (which it says represents a 25 per cent saving on private-use policies between April to June)
• And RACQ is offering a pause on premium price hikes on renewed or new policies before June 30.

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Car insurance industry slow to get off the mark

Consumer Action Law Centre insurance policy officer Tom Abourizk praised those select few, but slammed the broader industry’s response as “slow and inconsistent”.

“With fewer cars on the road due to COVID-19 restrictions, it’s likely car insurers will get a significant windfall due to fewer car accidents,” Mr Abourizk told The New Daily.

“Insurers generally require consumers to notify them of any relevant change in circumstances, and if that change increases the risk of a claim, it normally results in an increase in premiums.

It appears that this is not a two-way street for some insurers when the risk of an accident reduces.”

Against a backdrop of rising unemployment and extreme economic uncertainty, Mr Abourizk urged insurers to freeze premium prices for all of their customers.

That call comes after New Zealand’s AMI insurance (owned by Insurance Australia Group) drove some premium prices higher for its customers earlier this month.

Customers may not see discounts – at least for now

According to comparison site mozo.com.au, Australians fork out an average of $1131 on car insurance premiums every year, with drivers from Victoria ($1466), New South Wales ($1405) and the Northern Territory ($1293) paying most.

However, policyholders have not yet enjoyed the same fortunes as those in the United States, where more than 20 of the country’s largest car insurers have guaranteed billions of dollars in premium refunds.

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Insurance Council of Australia spokesman Campbell Fuller said although some insurers have passed on savings, others are continuing to weigh up their options, as they assess how the pandemic has affected their bottom line.

Insurers could revise their stance once figures detailing the impact on road traffic and overall claims are obtained.

But these considerations would need to be weighed against their policies’ underwriting criteria.

Mr Fuller said there were still risks involved with owning a car even though people were driving less often.

“Most motorists are still using their cars to drive to the supermarket, and car park bingles are one of the most common reasons to make a claim on a motor vehicle policy,” Mr Fuller told The New Daily. 

“Risks such as storm damage and flood damage still exist, and the chance of a car being vandalised remains similar, so insurers are looking at a broader picture and individual customer experiences to do what they think is right.”

Mr Fuller also emphasised that compulsory third party (CTP) schemes run by state regulators like Victoria’s TAC also play a role.

“CTP schemes can take many years to resolve because they help injured road users cover medical bills, rehabilitation and modifications, so regulators would need to weigh up the short-term impacts versus long-term sustainability,” Mr Fuller said.