Westpac NZ’s general insurance partnership switch up sends a strong message - with analysts from investment firm Forsyth Barr saying the displacement of IAG NZ is significant while Tower’s new position as the bank’s underwriter is “strategically important in the long term” for the insurer.
Last Friday, Westpac NZ announced it would be ending its relationship with IAG NZ, the country’s largest general insurer, after it put out a request for proposal (RFP) for a strategic relationship with an insurer.
A RFP is a formal request from an organisation calling on suppliers to propose how their products or services could achieve a specific outcome the organisation is looking for.
For over 30 years, Westpac NZ has had a partnership with IAG NZ with the insurer providing general insurance products to the bank’s customers. But from July 2026, Tower will take over and underwrite the house, contents, motor and landlord insurance products Westpac NZ offers.
Westpac NZ insurance customers don’t need to do anything as their insurance agreements will continue with IAG NZ saying last Friday it would “continue to offer renewals of all such insurance to these customers at their expiry”.
This new agreement, Forsyth Barr analysts say, expands Tower’s partnership distribution and builds their confidence in Tower’s aspirations to grow its share of the New Zealand general insurance market.
Analysts James Lindsay, Will Twiss and Georgio Toulis say this also encourages the insurer’s goals to "deliver gross written premium [GWP] growth through the cycle”.
GWP is the total amount customers pay for insurance coverage on policies issued by the insurer.
The Forsyth Barr analysts say while IAG NZ retains and renews existing insurance policies, “this arrangement positions Tower to capture new-to-bank and switcher flows” - people who have just joined Westpac NZ and those who have come to Westpac NZ from other banks.
The analysts say the partnership could contribute to Tower’s 2027 GWP growth ambition of 10% to 15%.
Longer term, the analysts say they estimate the partnership could add about $70 million of GWP for Tower by 2030 - “if it can capture 35% of our estimate of the total Westpac NZ book”.
Westpac NZ’s decision also validates Tower’s digital and risk-based approach, which was noted by the bank in its decision to choose the general insurer over IAG NZ, they say.
‘Naturally we are disappointed’
IAG NZ trades under the AMI, State, NZI, NAC, Lumley and Lantern brands. It provides general insurance products sold by ASB, BNZ, The Co-operative Bank - and, until recently, Westpac NZ.
The insurer had taken part in Westpac NZ’s recent request for proposal, saying last Friday “naturally we are disappointed by the outcome of Westpac’s RFP process”.
Bringing up IAG NZ’s over three-decade relationship with Westpac NZ, the analysts say: “This displacement is significant.”
With insurance policies remaining with IAG NZ, the analysts say they expect many existing customers to keep their IAG cover and it is unclear if Tower can actively target this.
“Though we understand existing customers who approach Westpac NZ can switch to Tower-underwritten policies if they wish from July 1, 2026.”
“From this date, we would assume Westpac NZ customers will have the ability to view Tower’s risk-based pricing and switch if beneficial to them,” the analysts say.
The level of commission that Tower will pay to Westpac NZ is unknown, the analysts say, compared to the 1.83% it paid in the first half of 2025 for its other partnerships.
In IAG NZ’s 2025 report, the insurer reported that through bank partnerships it had premium growth to $616 million.
The analysts estimate Westpac NZ represents 25% to 32% of the insurer’s bank pool - roughly $150 million to $200 million of GWP.
They say it’s significant due to their 2027 estimate for Tower’s GWP of $656 million, and the roughly $120 million of annualised partnership GWP reported in the first half of 2025.
“As such, this deal provides additional scope for Tower to meet its 2027 GWP growth ambitions (10% to 15%),” they say.
‘Long-term potential is material’
While any major GWP changes in the near term is unlikely, the Forsyth Barr analysts say “the long-term potential is material” for Tower.
And with the deal starting in July 2026, any impact on 2026 would be quite limited, the analyst say, but as new customers on board this should scale into 2027.
With the partnership between Westpac NZ and Tower initially set for five years, the analysts say this gives Tower “a referral pathway to extend access to its wider product set”.
In an NZX announcement last Friday, Tower chief executive Paul Johnston said "through this partnership, we’ll deliver data-driven insurance experiences integrated into Westpac digital banking".
"This includes the ability for customers to purchase, manage, and claim on policies online, as well as access Tower’s risk-based pricing and natural hazard risk information about their homes, all within their Westpac online banking experience.”
Westpac New Zealand also sells life insurance and travel insurance products.
Currently the bank's life insurance is underwritten by Fidelity Life Assurance Limited and travel insurance on some credit cards is underwritten by AIG Insurance New Zealand.
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