General insurer Tower to discontinue multi-policy discounts as chief executive Paul Johnston says risk remains that customers might not receive correct discounts

Tower is ending its multi-policy discounts with the general insurer saying the level of risk is unacceptable for meeting regulatory requirements and customers might still not receive the correct discount. 

The insurer has previously offered people who bought two eligible policies up to 10% off their premiums and up to 20% off if people had three or more eligible policies with Tower. 

Tower made the announcement on the NZX on Wednesday and in a statement, its chief executive Paul Johnston says "over the past few years, we have made investments in system upgrades and process improvements, with the aim of eliminating any risk of errors in calculating and applying the appropriate multi-policy discount".

"However a risk remains that some customers might not receive the correct discount. That’s not good enough, so we have made the decision now."

The NZX announcement also raised how the the level of risk was unacceptable for meeting regulatory requirements.

At this stage, Tower expects to discontinue its multi-policy discounts before the end of this year, Johnston says.

And at that time, Tower plans to initially stop offering multi-policy discounts for new policy sales, with existing customers transitioning at their next renewal after Tower makes the change to remove multi-policy discounts. 

"We’ll communicate directly with customers about our offering closer to their renewal," Johnston says.

Tower's decision to discontinue multi-policy discounts follows that of AMI, State and AA Insurance.

It also follows past legal action against insurers (including Tower) with companies having previously been punished for either failing to apply multi-policy discounts or overcharging customers.

Risk of being underinsured

Consumer advocacy organisation, Consumer NZ, is disappointed some insurers are dropping multi-policy discounts at a time when insurance costs are soaring.

"We think the lack of discounts will mean there’s a real risk policyholders will end up being underinsured, have too higher excess in order to bring costs down, or will be faced with the decision to drop insurance which will leave them vulnerable to financial shocks in the future," Consumer NZ's investigative team leader Rebecca Styles says. 

"From those we have surveyed, who have dropped insurance, most are doing so because of cost."

While a lack of discounts means people don't need to be loyal to providers and gives consumers a good reason to shop around, switching insurance products can be complicated, Styles says. 

"We think this is a reason we traditionally see low switching rates for insurance products.

"We encourage insurance customers to regularly review the policies they hold. Other than comparing and shopping around, you can increase your excess and don't be afraid to ask your insurer themselves how you could bring costs down."