Tower to refund $7.2m due to reduced car claims in lockdown

Friday, 5 June 2020

When it comes to buying insurance, set aside some time, and accept that adults read the contracts they agree to.

Kiwi insurer Tower says it will refund $7.2 million due to the lower cost of car claims during the Covid-19 lockdown period.

Tower chief executive Richard Harding said every customer would be refunded part of the car insurance premiums they paid during the level 3 and 4 lockdowns.

'We’re a Kiwi company and look after our customers, so after seeing a significant reduction in claims, we knew the right thing to do was pass these lower costs on,' Harding said.

For most customers, the refund will equate to around 40 per cent to 45 per cent of the car insurance premiums they paid between March 24 and May 13 this year, Harding said.

**READ MORE:

Tower insurance is refunding $7.2m in car insurance premiums to customers due to lower claims made during lockdown.

* Insurer Tower proposes 108 job cuts, as part of cost-saving proposal

* Australian-owned insurer under fire for hiking NZ car premiums

Tower chief executive Richard Harding says all customers will be refunded part of the car insurance premiums paid during the level 3 and 4 lockdowns.

* Tower follows AA Insurance's coronavirus lockdown profit pledge

Harding said all insurers needed to be transparent about how they dealt with the gain from lower claims during the Covid-19 lockdown.

'Refunding customers is the right thing to do, and while the lockdown could cause supply chain constraints and a slight uplift in claims expenses over the short term, the significant reduction in claims costs should be passed on,' said Harding.

Last week, Tower proposed to cut 108 jobs as part of its wider cost-saving measures.

Tower followed in the footsteps of AA Insurance, which froze premiums on house, car and contents insurance in April and set up a $2 million hardship fund to help policyholders struggling to pay premiums.

Last month AMI, owned by Australian insurer IAG, came under fire for hiking car insurance premiums despite a big drop in claims during the lockdown.

IAG said the premium hikes in May were already in motion before the arrival of coronavirus, while some of its premiums had dropped.

In April IAG said it had no intention of deriving any benefit from the Covid-19 lockdown, and intended benefits to flow back to its policyholders.

Consumer NZ said it was hard to see any justification for the increase in some car insurance premiums.

Refund details

*Refunds will be paid to all customers who held car insurance with Tower from March 24, 2020 to May 13 2020, inclusive

*Refunds will be calculated based on individual customers’ premiums paid, excluding taxes, fees and levies

*Refunds will be pro-rated for customers who cancelled or joined Tower during the lockdown period

*Tower will communicate directly with customers advising on how the refund will be paid, with refunds starting to be paid in late June

*The total cost of the refund is offset by the reduced claims cost and will result in a neutral financial impact to Tower