Consumer Watch: Call for compulsory car policy

Tricia Murray says the other driver had no money. Photo / Michael Craig

Most drivers want mandatory third-party insurance but overall costs likely to rise

Almost all New Zealanders think third-party vehicle insurance should be compulsory, a new survey shows. But they're being warned: Be careful what you wish for.

Canstar Blue found that 95 per cent think third-party insurance should be mandatory. This covers damage to other people's vehicles if there is a crash.

Of 1,800 respondents, 6 per cent had been in a crash with an uninsured driver in the past year; that rose to 9 per cent in Auckland and 10 per cent for generation Y drivers.

Canstar New Zealand general manager Derek Bonnar said: "There is strong and ongoing support from consumers for introducing compulsory insurance for drivers." He said being in an accident with an uninsured driver had cost him his no-claims bonus and increased his premiums.

AA Insurance was rated the best insurer overall by those surveyed.

James Dobler, of the panelbeating firm By Accident, said at least one vehicle a week in the shop had been involved in an uninsured crash. "It can ruin people. If you're an 18-year-old and you crash into a Mercedes you can do $100,000 of damage easily. You'd be paying that off for the rest of your life." He backed the call for compulsory third-party insurance.

But Insurance Council chief executive Tim Grafton said it was not so straightforward. "One of the effects would be to increase premiums for everyone across the board. If you have third-party insurance compulsory you have to have some way of funding those that are uninsurable, someone who has been caught DUI multiple times or had multiple prangs, or the people who just will not insure."

He said countries such as Britain, where third-party insurance was compulsory, still had problems with unlicensed drivers. Other countries that talked about "third-party insurance" were referring to systems similar to our ACC cover for bodily injury, not vehicle repairs.

Many insurance policies offer an uninsured driver extension. That means if you have a crash with an uninsured driver who is to blame, and you can name that person, your no-claims bonus and excess are unaffected.

Mark Stockdale, of the AA, said 92 per cent of drivers had insurance.

Of those who did not have insurance, most said it was because they could not afford it.

About 9 per cent of cars were not warranted, despite that being a legal requirement.

He said some people seemed to think compulsory insurance would get unsafe drivers off the road. "If they're unsafe their levy will be higher, but if they can't afford it they will drive anyway."

Overseas, third-party compulsory insurance had been shown to lead to more claims. "People will say: 'I crashed into someone, they're to blame, but I can't track them down. They don't want to lose their no-claims bonus so they invent an invisible third party. That's a problem and it ends up costing insurers more, and they then have to cover the increased costs through everyone's policies."

Bill unpaid after crash

West Aucklander Tricia Murray has backed the call for compulsory third-party insurance after she was left out of pocket when she had a run-in with an uninsured driver in a supermarket carpark just before Christmas last year.

She said the woman who crashed into her car caused $500 worth of damage. But the other driver was not insured, was struggling for money and had no way to cover the cost.

"She was near tears," Murray said.

"I don't think her car was warranted or registered either.

"I just thought it wasn't worth pursuing because there was no way she would be able to pay."