AA Insurance (AAI) has begun issuing $19.5 million in refunds to over 400,000 customers with motor insurance.

The insurer said everyone who held a personal motor policy with AAI and paid premiums between 24 March 24 - 13 May 2020 will get back approximately 42 per cent of the policy's base premium during that time.

A premium rebate was announced in April after AAI received fewer motor claims during the Covid-19 lockdown.

Chris Curtin, AA Insurance chief executive, said that in extraordinary times, AA Insurance needed to do more to support its customers.

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"It became clear very early on that many were affected by the economic impacts including reduced or no income, job losses and the uncertain future of businesses.

"We quickly determined three initiatives that we strongly felt were the right things to do to help customers – create a $2 million hardship fund, freeze premium increases across personal motor, home and contents products, and give premium rebates to customers with motor insurance.

"Premiums are calculated in advance, however after seeing the number of motor insurance claims fall because people stayed at home, we wanted to acknowledge this and give back to our customers, so we have reviewed the premiums paid and have started refunding a portion of this back to them."

Curtin said the decision was driven by the principles of fairness and doing the right thing by customers and the community.

Most customers with a comprehensive motor policy will receive a rebate of about $40 (inc GST).

AA Insurance said to calculate the rebates accurately, it needed to wait until after the end of its financial year, to get a clearer picture on the impact of the Covid-19 lockdown.

"We hope these premium rebates go some way to helping customers who've been financially impacted by Covid-19," Curtin said.

Customers receiving a rebate are currently being contacted directly via email or the post.

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The majority of rebates will be issued by the end of September. Some customers will be asked to provide their bank account details but will not be asked for their credit card details.

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