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Tower hands $7.2m back to car policyholders

Insurance company says refunding part of people’s premiums is the “right thing to do” after claims tumbled due to Covid-19 restrictions.
Posted on 05 June, 2020
Tower hands $7.2m back to car policyholders

Tower Insurance is refunding $7.2 million to customers with car policies following the lower cost of claims during the coronavirus lockdown.

Chief executive Richard Harding, pictured, says every customer will be refunded part of the car insurance premiums they paid while the country was at Covid-19 alert level three and four.

“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,” he explains.

“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, 2020.

“We had planned to make refunds by the end of May, but because we also saw lower claims during the level three lockdown, it’s taken us a little longer to calculate, so refunds will now be paid from late June.”

Tower will contact customers directly about how the refunds will be paid, with payments calculated on individual customers’ premiums paid, excluding taxes, fees and levies.

The company adds that the total cost of the refunds is offset by the reduced claims cost and will result in a neutral financial impact to the business.

Insurance Council chief executive Tim Grafton estimated in April that claims for motor vehicles might drop up to 90 per cent during the lockdown period, saving the insurance industry about $35m.

Harding says all insurers should be transparent about what they plan to do with the gains made from the lower number of claims made in recent months.

“Not making a windfall gain and 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,” he adds.