Transport minister Chris Bishop said the government is not opposed to mandatory third-party car insurance but questions whether such a requirement would deliver the expected benefits.
Speaking to interest.co.nz, Bishop said officials have indicated a large number of New Zealanders already carry vehicle insurance. “So the gains from making something mandatory are not necessarily as high as everyone else thinks,” he said.
The minister confirmed the government did not examine compulsory insurance as part of recent changes to the country’s driver licensing system but may review the policy in future. “We may well have a look at it but we didn’t consider it as part of that policy package,” Bishop said.
Dylan Thomsen, road safety spokesperson for the Automobile Association, echoed Bishop’s assessment. “New Zealand does actually have a compulsory system, similar to a lot of other countries, even though people don’t think of it that way,” Thomsen said, referring to the Accident Compensation Corporation (ACC), which covers personal injuries.
New Zealand established compulsory third-party vehicle insurance for personal injuries in 1928, with premiums paid during vehicle relicensing. That coverage was later replaced by ACC, the Crown entity overseeing the country’s no-fault accidental injury compensation scheme.
Property damage coverage, however, has never been compulsory for motor vehicles in New Zealand, unlike in Australia, European Union member states, most US states, and the United Kingdom. Rising costs for car insurance have been reported, with some drivers seeking cheaper third-party policies or switching providers to reduce premiums. Industry observers note that, from May 2025, major insurers reduced multi-policy discounts, reflecting a shift toward risk-based pricing that could further influence premiums and affordability.
Commerce and consumer affairs minister Scott Simpson said the government is not currently considering introducing compulsory third-party car insurance. “Because ACC covers personal injuries, third party insurance for injuries isn’t required. However, insurance to cover damage to vehicles or other property remains optional,” Simpson said.
A 2010 Ministry of Transport study found 92.4% of New Zealanders had car insurance, leading then-transport minister Steven Joyce to conclude the proposal might not deliver the anticipated benefits.
Thomsen expressed concerns about potential unintended consequences. “As soon as you make something legally required and compulsory, it can create some perverse outcomes or consequences with the system,” he said.
The worst-case scenario, according to Thomsen, is that compulsory insurance could increase costs for current policyholders because insurers would need to cover high-risk drivers they might otherwise decline. “We just don’t 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,” Thomsen said.
The Insurance Council of New Zealand lists three motor insurance policy types: third-party property damage, third-party fire and theft, and comprehensive cover, with more extensive coverage commanding higher premiums.
