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Pressure on CTP schemes as push for premium relief grows

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Compulsory third party (CTP) schemes are the latest target of consumer advocates, as they stepped up their push for more premium reduction measures to ease the financial impact on households suffering from the virus-triggered economic slump.

Youi has already announced last week it would offer a 15% premium relief for three months to motor customers while New Zealand insurer Tower says today it is working on a refund plan for motor policyholders.

Consumer group One Big Switch is behind the pressure campaign for CTP premium relief, launching a petition to push the states and territories to temporarily reduce the fees charged.

“We haven’t prescribed how the relief might be delivered or how much. That’s up to state governments to decide and to target accordingly,” spokesman Joel Gibson told insuranceNEWS.com.au today.

“We’re calling for reductions in car rego and CTP with the quantum and the targeting to be worked out by governments. It could be a reduction in future fees and premiums for example, proportionate to the drop in the cost of the scheme this year due to less traffic and fewer accidents.

“Our first goal is to get state governments to agree that some relief is fair and deliverable - the details will come next.”

The petition has collected over 5000 signatures, made up of 35% from NSW, 27% from Queensland and 20% from Victoria.

Each state and territory has their own CTP schemes, with premiums collected through vehicle registration fees. The premiums vary according to the respective jurisdictions.

The Insurance Council of Australia says the impact of the pandemic on CTP claims and premiums is a matter for each jurisdiction’s statutory scheme regulators.

Calls for premium reductions across many product lines have increased after strict social distancing measures were put in place, with supporters saying the move is justified, particularly with car usage, which they say have declined substantially.

But ICA says the same risks such as theft or vandalism remain even if a car is parked in the driveway or garage.

“Car insurance is bought to cover a variety of risks for a full year. Most risks remain unchanged during the COVID-19 pandemic,” ICA says.

In a statement today, Tower says its premium refund plan reflects the decline in car usage, a result of strict social distancing measures that have been in place since last month to suppress the spread of the novel coronavirus.

“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,” CEO Richard Harding says.

“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.

Youi says more than 50,000 customers have opted into its car insurance premium relief package just five days after its launch.

“We’re quickly closing in on $2 million of premium committed to be refunded for our customers that are being affected by COVID-19 and driving less,” CEO Hugo Schreuder said.