Insurer Tower ends discount, says risk of overcharging too high

Wednesday, 23 July 2025

Tower is one of a list of insurers whose systems were not up to making sure every customer who was promised a multi-policy discount actually got it.

The country’s third-largest insurer, Tower, will no longer offer multi-policy discounts, saying it is too risky for the business.

The NZX sharemarket-listed company used to offer discounts of up to 20% on premiums for people who bought multiple house, contents, landlord, boat, and car insurance policies with it.

But following a series of costly errors by insurers, including Tower, which resulted in action by regulators, Tower has told shareholders it will be removing multi-policy discounts by the end of the year.

MAS, Suncorp (owner of the Vero brand), Tower, ASB, AA Insurance, Cigna, and ANZ have all had to make refunds to customers, with Cigna, Vero, AA Insurance, and ANZ having been fined after court action by the Financial Markets Authority Te Mana Tātai Hokohoko.

In an announcement to shareholders on the NZX on Wednesday, Tower did not specify how the end of multi-policy discounts would affect the premiums of existing customers benefiting from them.

However, it said it remained committed to “competitive pricing”, and it would communicate what the change meant directly to policyholders.

Prime Minister Christopher Luxon says the government can’t keep bailing out flood-hit properties, as Nelson Tasman battles a third major weather event in two weeks. Hundreds of homes are damaged, and locals say the region feels like a test case.

Tower chief executive Paul Johnston said the insurer had made significant investments to upgrade its systems and processes, with the aim of ensuring all eligible customers received their appropriate multi-policy discount.

However, he said: “Despite these efforts and the substantial improvements made, the complexity of factors involved in accurately assessing the multi-policy discount means there is still a risk of error.

“This level of risk falls short of the high standards Tower has set for delivering excellent customer experiences, and is unacceptable for meeting regulatory requirements. Therefore, Tower has decided to discontinue the discount.”

People with multi-party discounts already in place would keep them until their policies renewed, which happens once a year on house, car, landlord, boat and contents insurance.

Financial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr co-led a clean-up of error-prone banks and insurers in 2017, 2018, and 2019.

The multi-policy overcharging scandal was uncovered by the FMA and the Reserve Bank of New Zealand Te Pūtea Mātua in 2018 when they conducted deep dive reviews of banks and insurers.

The reviews followed revelations in a royal commission in Australia that many insurers and banks, including the parent companies of New Zealand’s largest banks and insurers, had treated many of their customers shoddily.

The joint FMA/Reserve Bank review of general insurers led to many insurers discovering they had made mistakes, resulting in them overcharging customers.

In 2023, the FMA said banks and insurers had handed back about $150m to more than 1.5 million customers since regulators began in 2018 to demand regular reports on their mistakes.

Banks initially confessed to “more than 50” major errors that affected 431,000 customers, with reparations paid, or owed, of around $23 million. But instead of being a one-off, the bank conduct review led to ongoing reporting of errors to the regulators, and the scale of revealed errors in the sector ballooned.

In 2022, Clare Bolingford, the FMA’s director for banking and insurance, said: “The remediation work shows the extent of weaknesses in the systems and processes across banks and life insurers.”

She said in the banking sector alone, banks had confessed to 266 separate “issues” where 952,000 customers had been overcharged, or wronged, with banks having now paid $109m in compensation to them.