Covid-related surge in house fires hits insurer Tower's bottom line

Wednesday, 22 September 2021

Tower has experienced a rise in house fire claims that may be related to people spending more time at home, and struggling to get tradespeople to maintain them.

Insurance company Tower say it expects lower profits this year because it has paid so many large house insurance claims, including a surge in house fires.

Some of these have been related to Covid-19 disruptions, including fires caused by people overloading power boards when working from home, and not being able to get their chimneys and flues checked.

NZX-listed Tower on Wednesday told shareholders it expected to make an underlying net profit after tax of between $19 million to $21m in the year toSeptember 30.

Chief executive Blair Turnbull said that was down from the $22m to $24m profit it had been expecting.

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Large house claims were running at above long-term averages, particularly over the last three months, including four total loss fires in the past week, Turnbull said.

So far Tower had had 97 claims as a result of homes being badly damaged or destroyed in the past year costing $21.3m, he said.

This was up from 56 in the previous year costing $10.4m in claims paid.

Jeff Wright, Tower chief financial officer, and temporary head of claims, said three common causes behind the tick-up in claims had been identified.

Overloaded power boards may have become more common as people work from home, and plug in multiple devices to enable them to do so.

“One is instances of overloaded power boards,” he said.

This was where people working from home tried to run too many appliances from a single socket, which could cause overheating.

“Another common one, and this may be a reason why this year things are so different, is not well-maintained flues and chimneys on coal and wood ranges,” Wright said.

Lockdowns may have disrupted household’s normal maintenance regimes.

The third common cause that might be behind the rise in fires was an increase in fires caused by dehumidifiers and clothes dryers, he said.

Turnbull said the cost of many claims had risen as a result of pandemic disruptions to global supply chains pushing up the cost of building materials and second hand cars.

The cost of house materials rose 4.6 per cent in the June quarter alone because of supply chain constraints, he said.

In a bid to tackle cost inflation, Tower had taken decisive action, he said.

These could lead to higher premiums policyholders pay, and how claims were handled.

“These include rating and underwriting actions. strengthening our claims management processes, and working with our supply chain to manage increases,” Turnbull said.

While the current Covid-19 lockdown had has offset some of these effects, it has only partially reduced claims costs, he said.

“Tower remains in a strong capital and solvency position.”