Three house insurers stop their multi-policy discounts

AMI, State and AA Insurance have ended their multi-policy discounts, while Tower has stopped its no-claim discount.

State is also getting rid of its “years of insurance” discount.

AMI and State (brands of IAG, the largest insurer in Aotearoa) said that, instead of offering discounts, their personalised data mean customers are getting a “fair price upfront”.

Tower and AA Insurance told us the changes were about “simplifying” policy options.

We think insurers could be more transparent about why they made these changes, especially since the discounts were one way policyholders could reduce costs.

The cost of insurance continues to outstrip the rate of inflation. Latest Stats NZ data shows insurance costs were up 14.3% in the 12 months to December 2024.

What dropping the discounts could mean for your insurance costs

Insurers haven’t given us a clear explanation for why they’ve dropped the discounts.

One reason could be the increasingly sophisticated natural hazard risk data that is available for properties.

This means that homeowners who live in low-risk areas could see their premiums reduced by more than the discount amounts.

However, if you live in what’s determined a high-risk area, it’s likely you’ll have to pay a higher premium.

What seems to be clear is that there’s no discount for keeping all your insurance needs with one provider, regardless of the risk factors for your property.

Previous court action another reason for dropping the discounts

Another factor in removing the multi-policy discounts could be the high court action several insurers have faced in the recent past.

• In October 2024, the court ordered AA Insurance to pay a penalty of over $6m for not applying multi-policy and membership discounts, as well as no-claims bonuses. AA Insurance had also misrepresented potential discounts in marketing material. In total, it had overcharged over 200,000 customers by $11m.
• In March 2024, the Financial Markets Authority filed proceedings against Tower Insurance for failing to apply multi-policy discounts to the tune of $9.5m. While Tower Insurance still offers its multi-policy discount, its no-claims bonus has gone.
• In 2022, Vero, a Suncorp brand, had proceedings filed against it for overcharging customers $8.7m, while MAS was ordered to pay $2.1m for similar offences in 2023. MAS is still offering its multi-policy discount.
  

Most of these oversights were the result of system errors in IT systems. While insurers have worked to reimburse customers for the overcharging, it’s concerning they didn’t calculate the right price for their customers in the first place. This adds to a feeling of distrust.

Consumer NZ’s Sentiment Tracker data has shown that while trust in insurers ebbs and flows, overall, there is low trust in the sector. This follows trends we see in other service sector like banks and energy.

Can you get a cheaper premium?

We think the lack of a discount means there’s even less reason to be loyal to an insurer.

However, the cost of house and contents insurance is increasingly determined by the risk factors of your property. So, depending on what data insurers use to calculate your premium price, there may not be a great deal of difference in the cost of house and contents premiums between insurers.

We think this has potentially big implications on the choice available to consumers in the house and contents insurance market.

In the meantime, we encourage you to shop around by looking at our house and contents buying guide and comparison tool.