{"id":278206,"date":"2026-02-11T06:07:12","date_gmt":"2026-02-11T06:07:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/278206\/"},"modified":"2026-02-11T06:07:12","modified_gmt":"2026-02-11T06:07:12","slug":"compulsory-car-insurance-gains-from-making-something-mandatory-not-as-high-as-people-think-transport-minister-says","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/278206\/","title":{"rendered":"Compulsory car insurance: Gains from making something mandatory not as high as people think, Transport Minister says"},"content":{"rendered":"

Whether or not New Zealand should have mandatory third party car insurance is a topic of conversation that pops up regularly. But it\u2019s not something the Government looked at as part of its changes to the country\u2019s driver licensing system<\/a>.<\/p>\n

Speaking to interest.co.nz, Transport Minister Chris\u00a0Bishop says mandatory third party vehicle insurance is a popular proposal that has been talked about for a long period of time and he\u2019s not opposed to it.<\/p>\n

\u201cWe may well have a look at it but we didn\u2019t consider it as part of that policy package.\u201d<\/p>\n

Officials, Bishop says, have told him a huge number of New Zealanders already have vehicle insurance.\u00a0\u201cSo the gains from making something mandatory are not necessarily as high as everyone else thinks.\u201d<\/p>\n

A 2021 survey<\/a>\u00a0by Finder of 1882 New Zealand drivers found\u00a0 24% had been hit by an uninsured driver. However, Dylan Thomsen, road safety spokesperson for the Automobile Association (AA), agrees the gains may not be as high as people think.<\/p>\n

In 1928, New Zealand established a compulsory third party vehicle insurance scheme for personal injuries<\/a>.\u00a0Premiums were paid at the same time someone relicensed their vehicle.\u00a0This cover was later replaced by the Crown entity, Accident Compensation Corporation (ACC), which oversees New Zealand\u2019s no-fault accidental injury compensation scheme.<\/p>\n

Property damage, however, has never been compulsory for motor vehicles in New Zealand. But it has been looked into by previous governments.<\/p>\n

\u201cNew Zealand does actually have a compulsory system, similar to a lot of other countries, even though people don\u2019t think of it that way,\u00a0Thomsen says.<\/p>\n

\u201cWe do have a form of compulsory car insurance called ACC \u2026 A number of other countries overseas that have some form of compulsory insurance, it is for those injuries to people.”<\/p>\n

What New Zealand doesn\u2019t have is a compulsory requirement to cover damage to vehicles and not many countries actually do have that, Thomsen says. Those who do include Australia, which has compulsory third party insurance, members of the\u00a0European Union<\/a>,\u00a0most states<\/a>\u00a0in the USA and the\u00a0United Kingdom<\/a>.<\/p>\n

Scott Simpson, who is Commerce and Consumer Affairs Minister and Minister for ACC, says the Government isn\u2019t currently considering introducing compulsory third party car insurance.<\/p>\n

Simpson says injury cover from car accidents through ACC is funded by vehicle registration and fuel levies.<\/p>\n

\u201cBecause ACC covers personal injuries, third party insurance for injuries isn\u2019t required. However, insurance to cover damage to vehicles or other property remains optional.\u201d<\/p>\n

According to the Insurance Council of New Zealand (ICNZ)\u2019s website<\/a>, there are three types of motor insurance policies you can get. These are third party property damage, third party, fire and theft, and comprehensive cover.<\/p>\n

Third party property damage covers you against damage you cause to someone else\u2019s vehicle and\/or property, ICNZ says, and it\u2019s usually the cheapest type of car insurance.<\/p>\n

Third party, fire and theft covers damage caused by fire and theft to your car as well as third party property damage while comprehensive \u201ccovers you against accidental loss of or damage to your motor vehicle, as well as any damage to other people\u2019s vehicles or property caused by your vehicle (whether it was your fault or someone else\u2019s)\u201d, ICNZ says.<\/p>\n

\u201cIt also covers you for other costs such as salvaging your vehicle from an accident scene and towing it to a repairer. As well as a standard comprehensive policy, many insurers offer a variety of options and benefits.\u201d<\/p>\n

Generally the more extensive the cover, ICNZ says, the more expensive the policy.<\/p>\n

Thomsen says the AA is very pro people having insurance – the association thinks all drivers should at least have third party insurance, if not full insurance for driving on the roads as it\u2019s a sensible and good thing to do.<\/p>\n

\u201cBut we haven\u2019t seen the case made, in our view, for making it compulsory, and that\u2019s where it gets a little bit complicated.\u201d<\/p>\n

\u201cAs soon as you make something legally required and compulsory, it can create some perverse outcomes or consequences with the system,\u201d Thomsen says.<\/p>\n

Uptake of car insurance<\/p>\n

The Government has previously looked into making vehicle insurance compulsory<\/a> in 1988 and a petition was considered in 1994.<\/p>\n

It was looked at again in 2008. At the time, the New Zealand Press Association reported that the Government was looking into whether third party vehicle insurance should be mandatory and if there was public support for a scheme that would only cover property damage.<\/p>\n

This proposal to make car insurance mandatory became unlikely in 2010, after research by the Ministry of Transport found that 92.4% of New Zealanders had car insurance.<\/p>\n

In a press release at the time, then-Transport Minister Steven Joyce said the proposal may not deliver the benefits that might have been expected, because New Zealanders already have a high level of insurance.<\/p>\n

He also noted that countries which had compulsory vehicle insurance include the cost of injury cover in that insurance – whereas ACC levies cover that cost in New Zealand.<\/p>\n

“That means that the premiums in New Zealand for such insurance are unlikely to be the high priced deterrent to young drivers owning vehicles that many New Zealanders seek.\u201d<\/p>\n

Thomsen says some people would like to have insurance but are struggling financially so can\u2019t afford it while others may not really care about having it.<\/p>\n

He says it\u2019s uncertain whether making car insurance compulsory would actually change much.<\/p>\n

\u201cYou know, the idea that people who don\u2019t currently have insurance and are driving would suddenly do so if it became a legal requirement, we think a number of them still wouldn\u2019t, so it wouldn\u2019t actually make that much of a difference.\u201d<\/p>\n

Referring to the Ministry of Transport\u2019s survey, Thomsen says the kind of low 90% of people on the roads having insurance was similar to what other countries had in terms of insurance – even with different set ups to New Zealand.<\/p>\n

\u201cSo it\u2019s not as simple as saying \u2018if we make this change, we would have 100% of people on the roads who all had insurance.\u201d<\/p>\n

\u2018Worst case scenario\u2019<\/p>\n

Thomsen says effectively the worst case scenario is that having compulsory car insurance could potentially push up the costs people would pay for insurance because insurers would have to provide coverage to high risk people that they may not want to choose to take on.<\/p>\n

\u201cIf you\u2019ve got that system where you have to have it, then people have to have some way of getting insurance and so we saw that there could be a risk of it just pushing up costs for people who are already complying and have insurance, and not changing much in the group of people who don\u2019t have it.\u201d<\/p>\n

\u201cWe just don\u2019t think a strong case has been made to really show that it would make a meaningful difference in New Zealand, of making things that much better than what we currently have,”\u00a0Thomsen says.<\/p>\n

So what kind of situation might change this stance?<\/p>\n

Thomsen says there hasn\u2019t been any work for quite some time that tries to quantify how many people out there don\u2019t have any type of insurance currently and how many motorists are currently insured.<\/p>\n

The AA would want to see some work done so there was an idea of the numbers.<\/p>\n

\u201cThen you need to start doing an analysis of how much of a difference do you think a policy change would make,\u201d Thomsen says.<\/p>\n

\u201cHow much of an impact would that have on the market for all the people currently insured? Would it potentially cause them to just have to pay more for coverage when they are already covered and insured now.”<\/p>\n

\u201cJust weighing up what would the costs potentially be on all the people who are currently getting some form of insurance and following the rules versus how big is the group who don\u2019t have any insurance and how much difference do you think the policy would make?\u201d<\/p>\n

Thomsen says there are some countries with compulsory insurance in some form and they don\u2019t have 100% compliance.<\/p>\n

\u201cSo you still have a number of people uninsured on the roads in those countries and ending up in crashes where they don\u2019t have insurance coverage for damage they do.\u201d<\/p>\n

\u201cWe think some really thorough analysis by the Government would need to be done to show that this change could deliver more benefits than potential costs and impacts for people who are already insured,”\u00a0Thomsen says.<\/p>\n

\u2018Better driver training\u2019<\/p>\n

Last Tuesday Bishop announced changes to the country\u2019s licensing system – including ditching the full licence test for car drivers.<\/p>\n

Other changes include fewer eyesight screenings, an expansion of the zero-alcohol rule to all learner and restricted drivers, and new learner and restricted periods.<\/p>\n

\u201cDriver licences are essential for helping people access jobs, education, and healthcare. For many young Kiwis, gaining a licence is a rite of passage, but the current system is expensive, outdated and no longer works as well as it should,\u201d Bishop said at the time.<\/p>\n

Thomsen says: \u201cI think sometimes … it\u2019s more about the idea of if some of these young people weren\u2019t able to get insurance and it was compulsory, then that would mean that they would stay off the road, and therefore the roads would be safer.\u201d<\/p>\n

\u201cIt’s not necessarily as simple as that, saying that somebody will choose not to drive because they aren\u2019t able to get insurance.\u201d<\/p>\n

The most important thing in terms of road safety, he says, is around better driver training, practice and preparation.<\/p>\n

He says the AA would much rather the focus be on having better prepared, more skilled, more knowledgeable drivers coming through the licensing system.<\/p>\n

\u201cInsurance is about helping cover the damage after something bad happens.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Whether or not New Zealand should have mandatory third party car insurance is a topic of conversation that…\n","protected":false},"author":2,"featured_media":278207,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":{"0":"post-278206","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-new-zealand","11":"tag-newzealand","12":"tag-nz"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/278206","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=278206"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/278206\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/278207"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=278206"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=278206"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=278206"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}