Steering Clear: Analysis Of New Zealand’s Motor Vehicle Add-On Insurance Industry

Abstract

This paper considers the current state of the motor vehicle add-on insurance industry in New Zealand, in light of the Commerce Commission’s 2021 Market Study on motor vehicle financing and add-ons. It suggests the current way the industry functions does not promote competition and facilitates several issues detrimental to consumers. The issues are inadequacy of consumer awareness and understanding of add-on products, brought about by insufficiency of information, a point of sales advantage enjoyed by providers of primary products, and an unsuitable dealer incentive system. These issues are producing negative consumer outcomes, as demonstrated by quantitative and qualitative industry evidence. The paper considers how comparable jurisdictions, namely Australia and the United Kingdom, have corrected similar issues to increase consumer protection within the industry. It advocates that similar industry reform is necessary for New Zealand, which acts in a preventative way to best protect consumers. The primary reform that is recommended is the adoption of an industry wide deferred sales model for add-on products.