Govt Has Second Thoughts On Compulsory Third Party Insurance


The government is considering compulsory third party insurance for motorists but it may be having second thoughts.

It’s discovered that 92.4% of New Zealanders have motor vehicle insurance while the other 7.6% of vehicle owners either had an uninsured vehicle or didn’t know whether their vehicle was insured.

This conclusion is based on a ministry of transport telephone survey of 4000 New Zealanders.

Minister Steven Joyce says that while this survey doesn’t mean that the government is ruling out compulsory third party vehicle insurance, it does mean that the proposal “may not deliver the benefits that might have been expected, because New Zealanders already have a high level of insurance.”

The survey found that it’s actually a myth that  young people own the majority of uninsured vehicles. While 70% of uninsured vehicles were owned by people under the age of 40, there was a fairly even split between those aged under 25 years and those aged over 25 years.

Why don’t people insure their vehicle? The main reasons given in the survey:

  • “I can’t afford to do so” (Most common excuse)
  • “I had not got around to it”
  • “I think the car’s not worth insuring”
  • “I’m a safe driver and don’t need insurance”

The report found that the level of vehicle insurance here is actually comparable to countries with compulsory vehicle insurance.

  • In the UK where vehicle insurance is compulsory, about 6% of all motorists are estimated to be uninsured.
  • Insurance requirements vary across the United States but many states have compulsory injury insurance. The national percentage of uninsured motorists is estimated to be 13.8%.
  • Some Western European states with compulsory regimes have achieved very high levels of private vehicle insurance.
  • In Sweden, less than 1% of the driving population is uninsured.

As we have ACC to cover the cost of any injuries sustained in a crash, any compulsory vehicle insurance scheme introduced here would only be for property damage.

The Ministry of Transport says it’s not aware of any country that makes only property damage insurance compulsory. The research shows that a high number of people choose to insure their vehicle for property damage.

Compulsory insurance has been suggested as a mechanism to reduce the likelihood of young drivers owning ‘high risk’ vehicles, as they could be more expensive to insure. However, it’se noted that in other jurisdictions, such as the UK, the very high insurance premiums for ‘high risk’ vehicle owners are often due to the inclusion of a personal injury element in the insurance, as the costs of injuries often greatly outweigh the costs of any property damaged. Similar levels of annual premiums are unlikely to be seen in a property-damage only system.

This research suggests that compulsory insurance may not have significant safety benefits. As New Zealand’s rate of insurance is already very high there is “a smaller scope for increasing levels of vehicle insurance.”




  1. Greg Bodnar says:

    I’m a bit surprised by this. MoT was recently consulting on mandatory insurance and they believed that the level of uninsured drivers was approximately 25%. I honestly have a hard time believing that a telephone survey on the subject wouldn’t be skewed by people lying. Surely there must be a better way to assess the current situation - maybe aggregating data from vehicle registrations and from insurance providers.

  2. Jon C says:

    @Greg, It is odd to make important decisions based on a phone survey. The ministry claims the maximum margin of error for this survey is plus or minus 1.5 percent which is better than political surveys I see so I dont know how they come to that conclusion! 4 thousand people were rung ans asked whether they owned a vehicle, and if so whether they were insured. Those who did not have vehicle insurance were asked why they did not.

  3. Richard says:

    This is a stupid way to conduct such a survey and as Greg says they should go to the appropriate industry, i.e. the insurance industry but their records of claims would not include crashes uninsured v uninsured. From my experience in Insurance claims I would say the “uninsureds” are represented disproportionately in crashes as well

    I would say nearer 30% vehicles in NZ would be uninsured unless things have changed in recent years.

    There are a lot of people out there on the roads who are totally thick and wouldn’t know what insurance was and would say yes to anything on the phone! We had more than one case where people came in to Claims after a crash thinking their consumer credit insurance they had to arrange for HP covered their damaged car and TP liability!! They would say YES in a survey.

    This also shows how lacking in knowledge and ability some of the bureaucrats in Wellington are.

  4. James says:

    I guess the Margin of error only shows the possible variance you’d get for the same set of questions asked to the entire population. Rather than whether or not the entire population in fact has motor vehicle insurance.

  5. Matt L says:

    Regardless of the study there are probably better ways to stop young drivers getting high powered cars. Why not just restrict young people to cars with less than a set level of engine power so that way they can’t buy and drive around in turbo powered rocket ships as soon as they get their licence, that would also stop the issue of wealthier parents just paying for the insurance.

    At the end of the day I don’t think it is right for the government to require you to buy any industries product. This idea (worldwide) probably originated from an insurance industry lobby group to begin with anyway as a way of getting more business.

  6. rtc says:

    @Matt I once had an accident in a borrowed car (which I later found out I was not insured to drive) and someone driving a car without insurance who drove into me. The end result was that despite it being the other driver’s fault I never got any money back for repairs and even had to take them to the small claims court who awarded me the money - I have never seen a dime of it and basically never will. The point being that everyone having insurance prevents people having to pay for other people cutting costs by not buying insurance. If had been able to deal with his insurance company I would have had the car repaired and they would have chased him up for the money rather than me, and failing.

  7. Richard says:

    rtc has raised one of the main reasons for the proposal, it’s not just to get rid of boy racers it’s to make people face their responsibilities. At the moment the uninsured people often thumb their noses at the victims of their bad driving and their insurers and many debts have to be written off. On the other hand if they are innocent they turn up at the insurance company of the guilty party expecting instant service!!

    They are free loaders and should be made to contribute. Insurance is a necessary expense when motoring

    rtc has expressed a worthwhile warning to everybody. Before you drive another car what is the insurance position? In the case of our family car we have a restriction on cover to drivers over 25 only for example. If you have comprehensive cover your policy usually covers you for third party liability in another vehicle of similar type. i.e. if you have a private cover you wouldn’t have cover in a commercial car. This cover only applies if not covered by the insurance held by the owner.


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