Tower refunds $7.2m

Kiwi insurer Tower says it will refund $7.2 million because of 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 to 45 per cent of the car insurance premiums they paid between March 24 and May 13 this year, Harding said.

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 costsaving 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.