Bodo Lang: Massey University marketing professor on Tower Insurance getting rid of multi-policy discounts

Tower is ending its multi-policy discounts, with the insurer claiming the level of risk is unacceptable for meeting regulatory requirements.

The insurer previously offered people who bought two eligible policies up to 10 percent off their premiums and up to 20 percent off if people had three or more eligible policies.

Massey University marketing professor Bodo Lang explains why these changes are taking place.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Tower Insurance is getting rid of the old multi policy discounts.
This is the discount that you get on your premiums
if you have some combo of your house and your
car and your contents, or other different kinds of insurance
all with the same company. Tower and other insurers have
been fined in the past for failing to apply the
discount correctly, and Tower's CEO says there's now an unacceptable
risk it might happen again if they keep it, so

(00:20):
they're getting rid of it. Bodo Lang is a marketing
professor at Massi University. Evening, Bodo, Good, Evening. I struggle
to believe that the risk is so high.

Speaker 2 (00:28):
What do you think, Well, it does seem surprising that
this error occurs in the first place, But if you
look at the customer numbers, you know they've got hundreds
of thousands, sometimes millions of customers and you only need
a small number. You know, in the numbers I've seen,
it's literally zero point zero one percent, and that's enough
customers for the Commerce Commission to swing interaction. And that

(00:51):
obviously is a huge risk for these large insurers.

Speaker 1 (00:54):
But how would it even happen? I mean, would it
be a case that Bodo has taken out all this insurance,
but they haven't linked all of bodos different insurances together
in order to realize that he deserves a discount. Is
that how it happens.

Speaker 2 (01:06):
I think that's what it is. And I think what
these large insurers really struggle with is that they have
often legacy systems that don't talk to each other. So
they might have different divisions, They might have bought a
life insurance division that is on a different system, and
so these systems often don't talk very well to each other.
And it's not just a system but also a process issue.
If you and me opened an insurance company, we would

(01:28):
probably start from the ground up with some integrated, clever system.
But that's not how these companies started off with. So
they've got old systems that don't really speak to each
other and processes that probably don't allow cross checking. And
the numbers of customers are so vast that there is
I think a real risk of more customers being affected.

Speaker 1 (01:47):
Is this a case, Bodo of an unintended consequence of
going after them for breaking a rule? Like the commuis
commission quite rightly sees a rule has been broken and
punishes them, but then the unintended consequences that we all
pay more for insurance.

Speaker 2 (02:00):
I think there is a real risk of this. I'm
trying to see the silver lining in the story and
the obvious that the first result is obviously that this
multipolicy discount will disappear, which is negative. But you know,
the silver lining I think for consumers is that this
will actually make the insurance sector more transparent, so it's
easier to compare single policies and switching insurance policies. Isn't

(02:23):
that difficult if you put a little bit of time
behind it. You know, you can sometimes say humongous amounts
of money. So yes, it is none in the consequence
that this discount will disappear. But I think Tower will
be in a position where they will really have to
look at their policy the premiums basically because they are

(02:46):
scoring below average on customer satisfaction. I think they're at
real risk of losing customers when this multipolicity discount disappears,
So they would do really well to sharpen their pencils.

Speaker 1 (02:58):
But do you have any opinion on the price of butter?
Because I know you're a man who is across all
of these things right now. Have you looked at the
situation with the butter meeting with Nikola Willis and Miles
Harrell and thought, how on earth Nichola can get out
of this site with you know, saving face.

Speaker 2 (03:14):
Yes, I haven't looked into it. I've been overseas for
a while, but I think my basic sense is that,
you know, at one point we used to have the
world's the ninth largest dairy producer in the world in
this country I e. Fonterra, and I'm always kind of
kind of gobsmacked why dairy products are so incredibly expensive
when you compare them with prices overseas. I do realize

(03:37):
that in the you many of the dairy products are
subsidized through through Texas obviously, and so it's not fair
to just compare the retail price, because actually sometimes the
real retail price in Europe is artificially lower through subsidies.
But it does strike me as odd that we're paying
so much, And I think the rationale of saying, well,

(03:59):
this is what we can get on the export market
doesn't wash well, because there's obviously other costs involved in
getting products to the export market, which we don't incur
when we sell domestically.

Speaker 1 (04:09):
All right, Bodo, Thanks very much, Bodo Lang, marketing professor
at Massi University. There's a solution. How about we do
what they do in the EU and we subsidize the
price of butter. So if we all just pay a
little bit more tax, then the butter will come down
in price. You like the idea of that, No, me neither.
For more from Heather Duplessy Allen Drive. Listen live to
news talks. It'd be from four pm weekdays, or follow

(04:31):
the podcast on iHeartRadio.