An insurer has paired up with a charity to trial offering low-income earners car insurance for a flat $8 per week premium.
People who borrow via Good Shepherd's no- or low-interest loan scheme to buy a car will now also gain access to low-cost comprehensive car insurance via Vero.
Good Shepherd and Vero have been working on the trial since 2018 when they found common ground at a financial inclusion industry forum hosted by the Government to get the industry talking about how to get products to New Zealanders who were missing out.
Fleur Howard, chief executive of Good Shepherd, said it had become concerned about how many of its clients were borrowing to buy cars but weren't insuring them.
"A car accident can be a double blow for our clients. Not only do they not have the money to repair or replace the car, but their ability to get to work is affected because they often work irregular hours outside of accessible public transport schedules."
Howard said for those who couldn't afford to pay car insurance or the excess on a claim, the financial fallout could be enormous.
"Imagine having to continue making repayments on a vehicle you can't afford to repair or that has been stolen, when you have no way to get to work?"
She said one woman it spoke to had been left with a $50k repair bill for the other vehicle involved in an accident - more than what the woman earned in a year.
Those who apply for a loan through Good Shepherd have to earn under a certain amount to be eligible. For singles, that is under $42,106, and for a couple with no children it is $43,784. A family with two children can earn up to $53,480.
The charity offers interest-free loans of up to $1500 and charges interest of 6.99 per cent per annum on loans up to $10k for those who qualify.
A Good Shepherd spokeswoman said it didn't know how many of its borrowers would take up the insurance but it estimated about 200 people might.
She said part of its lending process was ensuring a car loan borrower could also afford to pay for servicing, a warrant of fitness, registration and insurance for the car.
If the trial is successful, it is hoped the insurance product could be expanded to be on offer for other low-income earners.
The spokeswoman said the reasons many did not get insurance were affordability and a belief that if they had an accident it would only affect them and they would just have to "wear it".
Finding hundreds of dollars at short notice to pay for an insurance excess was also beyond low-income earners.
Vero chief executive Jimmy Higgins said research it undertook with Good Shepherd's clients showed that people's values and background also informed their view of risk.
"Many of the Good Shepherd NZ clients we spoke to felt that protecting a material possession like a car was less important than taking care of their family and community.
"But for some families a car is more than a possession, it's a connection – to work, family, wellbeing, church, community."
Premiums would be fixed at $8 per week and customers won't pay any excess on their first claim.
The policies will allow for any driver to be included as long as they are complying with their licence conditions and will have some more relaxed application criteria than standard policies.
Higgins said its research also showed Good Shepherd NZ clients might have tried to get insurance in the past, but been declined because of things like historic criminal convictions.
"Our underwriting will therefore be more relaxed around criminal convictions, although we are still unlikely to be able to offer cover for customers with convictions for fraud, motor vehicle theft or multiple DICs [drunk in charge of a vehicle]."
Higgins said part of the pilot would assess whether more relaxed application criteria would be sustainable in the long-term.
The trial will run for an initial 12 months.