Insurers are used to crises: earthquakes, floods, fires and accidents.
But this year’s pandemic has thrown a new set of challenges at New Zealand’s insurance industry.
Insurers have had to grapple with the potential impact of their customers suffering financial strain and struggling to keep up their payments – and almost two months when life as we know it went on hold, taking some claims with it.
Cris Knell, executive general manager of distribution at Suncorp, said his business had quickly moved online as the country went into lockdown.
“By day two of lockdown, we had close to 90% of our business development managers online supporting their clients.”
He said, by the time the country shifted to level 3, then 2, much of the business’s activity had been re-engineered to be delivered digitally. Professional development days, webinars and even conference events shifted online.
“The shutdown’s shown us that in the short term, we can manage contact and travel restrictions effectively. Suncorp New Zealand’s meetings right up to board level are now being held remotely as our 1200-strong team gets on with business. We’re anticipating higher flexibility and more agile and remote ways of working into the future.”
He said Suncorp had also committed to paying broker bills immediately, to help with their cash flow.
“We then looked at the people side of our business and aligned our BDMs and BDCs to support their networks digitally. This included giving customers more time to pay and enabling premium deferrals, premium holidays and premium and cover suspensions if these options were needed due to hardship.
“I’ve seen examples internationally where other insurers have focused on speed, but in doing so left their brokers and advisers without income for months ahead, and potentially in a worse situation than the customers they were trying to help. We’re all in this together, so we’ve concentrated on developing solutions that are right for our customers, our brokers, advisers and us.”
For general insurers, five weeks of lockdown, then another two of almost-lockdown, made a difference to claims.
Insurance expert Michael Naylor, from Massey University, said there was a significant drop in car crashes and burglaries.
“The key question discussed in the media is 'have our social habits been changed long term?'
“Some have been optimistic, but I can't see much change occurring apart from an increased tendency for people to work more from home. This may impact mostly on small business, where owners may discover that a rented premises is not required. Even travel insurance will be back within 12 months.”
Research by actuarial firm Finity Consulting showed that the savings on personal motor claims in the level 4 lockdown would be about $35 million. New Zealand’s motor insurers paid out $1.159 billion in claims in 2019.
Lower traffic volumes would lead to an 80% reduction in collision claims frequency, the actuaries said.
But they said that could be offset by things such as potentially larger claims when they did happen, supply chain constraints, inflation and exchange rate impacts. Their report also noted that other perils, such as theft, might experience a smaller decrease than collision claims.
Insurance Council chief executive Tim Grafton said his members had already moved to respond to this and to support their customers.
“We have seen a range of support offered including deferral of premium payments, changes to terms resulting in different premium levels, changes to excesses as well as some rebates of premiums.”
He said the industry was acutely aware of the pressure Covid-19 was placing on Kiwis and had been actively supporting customers at a time when they too are coming under financial pressure.
“It is critical that each insurer responds in a way that is most appropriate for their customers and for them to maintain solvency. In this way, our members can balance the needs of those in genuine hardship with their obligation to be there for all policyholders.”
The Financial Markets Authority made it clear to insurers that it expected them to step up and help customers.
FMA director of banking and insurance Clare Bolingford wrote to insurance representatives telling them that it expected insurers to “remain cognisant” of the challenges faced by New Zealanders, offer support and do what was possible to maintain or reduce costs for consumers, including offering reductions or refunds of premiums when they experience lower-than-planned claims ratios.
Tower Insurance said it would pass on any savings it made due through the outbreak in refunds to car insurance customers before the end of May.
Chief executive Richard Harding said the company would not profit from Covid-19 and would make further refunds if needed.
"We know that people are driving less, and this is resulting in lower claims, so any savings we make will be passed back to our customers.
"There is still a whole lot of uncertainty at the moment and we have not processed refunds on this scale before, which is why we need some time to calculate and arrange them. But customers can be assured that refunds will be paid, and we will let them know all the details beforehand.
"In the meantime, any customers experiencing financial hardship should call us. We have a specialist team on hand and a range of options to support customers and help reduce any financial pressure.”
QBE Insurance directed AUD$2.6 million ($2.79 million) to support the global response to the crisis.
Funds will be deployed through the QBE Foundation’s existing charity and not-for-profit partners around the world, to help them deal with increased demand for their services and help offset a decrease in donations and funding due to the economic impact of Covid-19.
AA Insurance said the drop in car insurance claims in March and April meant it was able to introduce three new initiatives: A $2 million fund for customers in hardship, a freeze on car, home and contents premium increases, and the potential for premium reductions for car insurance customers.
“This is about fairness and doing the right thing by our customers and the communities we live in,” chief executive Chris Curtin said. “We are mindful people are driving less, which is reflected in fewer claims being made. We do not intend to take advantage of this at the expense of our customers.
“At AA Insurance, we define our purpose as ‘we care, we help, we get things sorted’,” Curtin said. “And while this isn’t the expected insurance event that we would typically respond to, it’s just as important to look after our customers now, as ever, as we work on a fair solution and get through this pandemic together.”
AA Insurance would continue to absorb operating expenses, as well as any impact on its investment portfolios to ensure customers saw the full benefit of the reduction in claims, particularly car insurance claims.
Suncorp, the majority shareholder of AA Insurance, matched AA’s $2 million customer hardship fund by establishing a further $2 million hardship fund for its Vero and Asteron Life customers.
Knell said Suncorp had not yet seen significant shifts in demand.
“But the conversations we’re having have changed. The pandemic’s put many New Zealanders under significant financial pressure.
“We’ve responded with practical support solutions intended to give them peace of mind. Motor claims have been accepted even if a customer’s WoF or Driver’s Licence expired during lockdown. We’ve covered office equipment for employee use at home and we’ve relaxed our conditions on vacant business premises. We’ve flexed our approach to help customers get through and retain their insurance wherever possible.”
Knell is relatively bullish about what might lie ahead for the sector from here.
“There’s a lot of talk of New Zealand going into recession and unemployment spiking to 9% or higher, but this sentiment needs to be balanced against the huge fiscal stimulus currently being provided by the Government, banks and financial institutions. I’m confident that most brokers and advisers will come through this event with a more agile and responsive business. I am also sure that connecting with customers in a time of crisis provides brokers and advisers with the opportunity to show the value they add in managing client risk as they respond to changing circumstances. “
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