Insurance: How AA Insurance would settle a major burglary claim

By John Grant

We asked some high-profile New Zealand insurers, including AA Insurance to look at a fictitious burglary claim and indicate how they would proceed to settle the loss. You can find the overall results of this comparison here.

With a burglary ocurring around every 8 minutes in New Zealand it seemed a good test of our insurers to see how they would respond to a claim. We compared five insurers and the following is the detailed response we received from AA Insurance. The claim involved the loss of 15 items that had been stolen during the burglary of their customer’s residential property. This is the summary of the items stolen:

AA Insurance said they had processes at the time of application for insurance to avoid customers being caught by policy limits. This included discussing with them details of their contents and personal effects to identify items that may need special cover.

They also subsequently remind customers of the limits applicable at each renewal. We counted a total of 25 sub-limits applicable in their Contents policy, the second highest of the five insurers. However limits can actually be positive if the cover is for items that may not otherwise be insured.

AA Insurance said that their main focus is making the process as stress-free as possible. They will complete the claim documentation and then work with the customer on a one-on-one basis to confirm values and agree on settlement. They were initially reluctant to advise firm dollar amounts as their focus is on replacing items rather than dollar saving. However the fact is that the amount likely to be paid in this scenario is the lowest of all of the insurers. The cause is the policy limits being consistently at the lower end of the scale. AA Insurance contents policy scored the lowest amongst the five companies in this comparison, with a product score of just 58% (see here for details) and offer mid-range pricing (go here for pricing comparisons).

The settlement proposed as submitted is as follows;

Positives for AA Insurance

They showed an overall willingness to go the extra distance. They were the most thorough of all insurers and showed a determination to get this completed correctly. They have also indicated that they would pay for both the house keys and the car key, locks and key replacement up to the policy limit of $1,000. Their approach to someone wanting to cash settle is particularly fair. They indicated “If our customer didn’t want to replace the jewellery or watch specifically they could choose to have a store credit with one of our suppliers, which means they can choose whatever they would like, instead of replacing all the individual items. Most customers do this. However, in the minority of cases where a customer only wants to have a cash settlement, we would pay them the same as we would have paid the store.”

Negatives for AA Insurance

Their policy limits are low and although they strive to make customers aware of this, it is likely that some will end up finding their claims settlements reduced to the limits available in the policy.