Insurance Incentives for New Customers Spark Debate Over Fair Pricing and Loyalty Costs

Promotional rewards tied to new insurance policies are drawing attention in New Zealand, as industry observers and consumers question how these offers affect long-term customers already facing rising premiums.

A recent campaign offering Prezzy cards to individuals taking out new cover has triggered discussion about pricing structures across the general insurance market. While such promotions are designed to attract new business, critics argue they may unintentionally disadvantage existing policyholders who renew year after year without similar perks.

Concerns Around Incentives and Customer Fairness

Insurance broker Glenn Marshall raised concerns after seeing a promotion across multiple brands owned by Insurance Australia Group (IAG), where new policies came with a $200 Prezzy card. Speaking as a consumer, he questioned whether these offers create an uneven playing field.

Marshall pointed out that customers switching providers—or even moving between brands—could access benefits not typically extended to loyal clients. He suggested that this dynamic may shift costs onto long-standing policyholders, particularly at a time when many households are already managing higher insurance expenses.

According to his account, IAG clarified that the reward was not a price reduction but a promotional incentive available to both new customers and existing clients who add additional cover. Despite this explanation, concerns remain about how these campaigns influence overall pricing strategies.

Marshall has also brought the issue to the attention of the Financial Markets Authority (FMA), which oversees financial conduct in New Zealand.

Regulator Monitoring Promotional Activity

The FMA has acknowledged awareness of these types of marketing campaigns. While the regulator does not currently view such offers as inherently problematic, it continues to observe how they are used within the industry.

Officials note that incentives can encourage competition by prompting consumers to compare providers and review their coverage. At the same time, the FMA has indicated that it remains open to hearing from individuals who feel misled or disadvantaged by promotional activity.

“Loyalty Tax” Remains a Key Concern

Consumer advocacy group Consumer NZ has highlighted a broader issue often referred to as the “loyalty tax.” This concept describes a situation where long-term customers pay more over time compared to new or switching customers who receive promotional benefits.

Insurance spokesperson Rebecca Styles explained that many people rarely review their policies, leading to missed opportunities for better pricing or improved coverage. This “set-and-forget” behavior can leave loyal customers paying higher premiums than necessary.

She emphasized the importance of regularly comparing policies, noting that while promotional offers can be appealing, they should be evaluated alongside coverage details and overall cost.

Insurance Costs Adding Financial Pressure

Recent tracking by Consumer NZ shows insurance is becoming a more significant burden for households, alongside expenses like housing, food, and debt. Premium increases across home, contents, motor, and health insurance are contributing to financial strain.

As costs rise, accessibility is becoming a growing concern. Some consumers report difficulty maintaining adequate coverage, particularly when policies become more complex or less transparent. This has contributed to declining trust in the insurance sector.

Switching Trends Show Limited Movement

Despite ongoing cost pressures and the availability of incentives, many New Zealanders remain with the same insurer for extended periods.

Research commissioned by the Insurance Council of New Zealand (ICNZ) reveals:

• 20% of respondents changed insurers in the past two years

• 34% switched within the past five years

• 32% have never changed providers

Only about one in five policyholders actively compares options at renewal time, while a quarter say they never explore alternatives.

The data also shows that younger consumers are more likely to switch providers, whereas older individuals tend to stay with their existing insurer. Regional and income differences also influence switching behavior.

Affordability, Trust, and Climate Risk

Insurance affordability continues to be shaped by broader economic and environmental factors. Rising premiums are often linked to increased claims costs, inflation, and heightened exposure to climate-related risks.

In areas more vulnerable to natural hazards, some policyholders face higher premiums or reduced access to coverage. This has raised concerns about protection gaps and long-term resilience for affected communities.

At the same time, declining trust in insurers—alongside other sectors like healthcare and energy—suggests a need for clearer communication around pricing, policy terms, and claims outcomes.

Key Takeaway

Promotional rewards for new insurance policies are adding momentum to an ongoing debate about fairness, transparency, and customer treatment in New Zealand’s insurance market. While incentives can drive competition, they also highlight the importance of regularly reviewing coverage and understanding how pricing structures impact both new and long-term policyholders.