All too often Kiwis complain that they have to pay their excess when they weren't at fault. But that's how insurance works. No refund unless the insurance company can recover its costs.
Uninsured drivers sometimes spend decades paying back debts after causing accidents. IAG, for example, has third parties still paying off debts from as far back as 1997, says Judith Harvey, the company's private motor vehicle insurance manager.
Sometimes innocent drivers never get their excess back. In one case dealt with by Karen Stevens, Insurance & Financial Services ombudsman, an innocent driver found himself paying out in a three-car pileup.
Tim, the insured driver, braked. A second car stopped in time, but was shunted into Tim's car by a third vehicle. The third car drove off and the second car driver wasn't liable because he stopped in time.
If there are two versions of a story and liability can't be proven you might need to go to the Disputes Tribunal to settle the dispute, or forgo your excess and no claims bonus.
Only if the other party is insured and their insurance company accepts they were at fault, will your excess be refunded and no claims bonus reinstated.
Insurance companies do try to recover their costs from uninsured drivers. They can't always, especially if the driver uses the No Asset Procedure – a type of low-level insolvency – to wipe clean their debts.
If neither party is insured you'll need to negotiate between you over who is liable to pay for the cost of repairing the damage to the cars involved. If you're uninsured and not at fault you'll need to negotiate with the other driver's insurance company. You're not their client so don't expect it to be easy.
Harvey recommends always getting third party cover at the very least. "The main message from IAG is that it's worth paying a little extra for comprehensive cover, it can save you a lot in the long run."
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Some third party and third party fire and theft policies also cover damage to your vehicle if it is hit by a vehicle driven by an uninsured driver. This extension only covers you if the insurance company can find the at fault party, which isn't always easy.
Then, says Susan Taylor, chief executive officer of Financial Services Complaints Limited, one of the complaints resolution services, there's the issue of "uninsured insured" drivers.
That's where you are paying for insurance, but you've voided it by doing something stupid, such as carrying passengers on a restricted licence of failing to declare drink driving or other convictions at renewal. If your policy lapses you have no cover.
In one case heard by FSCL an insurer declined to pay for a written-off car because the owner's partner was driving it and she hadn't declared that he had criminal convictions.
One driver who complained to the ombudsman handed driving over to a 21-year-old friend rather than stop and take a nap. Drivers aged under 25 were excluded under the policy, leaving the car uninsured.
Parents need to understand that pretending they're the main driver of a car driven predominately by their offspring is in reality is simply throwing money down the toilet.
Overseas it's a criminal offence not to have insurance. One of the reasons is to ensure that injured third parties get paid out. Here we have ACC to do that. However, thanks to a 2014 law change to the Sentencing Amendment Act an injured party could sue a vehicle owner for the 20 per cent of their income not paid by ACC.
One insurance industry figure, who doesn't want to be named, says he feels strongly that third party motor vehicle insurance should be compulsory.
"All the drivers on the road who pay for comprehensive cover are paying the insurance bills of the uninsured."
As well as ensuring a much better chance of being covered if you're hit by a third party, it stops young drivers buying cheap high-performance vehicles such as a Subaru Impreza Turbo, he says, which should reduce the amount of boy racers on the road.