Car insurance is a two-way relationship. Your insurer has obligations to you, and you have obligations to them. This guide explains what NZ law and industry codes require, how to handle disputes, and what has changed under recent legislation.
When you take out a car insurance policy in New Zealand, you enter into a contract. That contract is governed by a mix of legislation, regulation, and industry codes that give you real protections. Understanding these rights is worth the effort - it puts you in a stronger position when buying cover, making a claim, or dealing with a dispute.
At a high level, your core rights as a car insurance policyholder in NZ include the right to clear and honest information about your policy before you buy, the right to a fair and timely claims process, the right to a clear explanation if your claim is declined, the right to access a free dispute resolution service (the IFSO), and the right to cancel your policy and receive a refund of any unearned premium.
These rights come from several sources. The Contracts of Insurance Act 2024 is the primary legislation governing insurance contracts. The Financial Markets Conduct Act 2013 sets fair dealing obligations. The Fair Insurance Code provides additional industry standards. And the Financial Markets Authority (FMA) oversees the whole framework.
Alongside your rights, you also have obligations. The most significant is your duty of disclosure - the requirement to provide honest and complete information when applying for insurance and when making a claim. Getting this balance right is key to a smooth experience with your insurer.
This guide walks through each of these areas in detail, with a focus on what they mean in practice for car insurance policyholders in New Zealand.
The Fair Insurance Code is a voluntary code of practice administered by the Insurance Council of New Zealand (ICNZ). It sets minimum standards for how member insurers deal with their customers across the entire policy lifecycle - from selling policies to handling claims and complaints.
Most major car insurers in New Zealand are ICNZ members, including AA Insurance, AMI, State, Tower, and Vero. If your insurer is an ICNZ member, they have committed to meeting the Code's standards. You can check membership at icnz.org.nz.
Under the Fair Insurance Code, your car insurer must act honestly and fairly in all dealings with you. They must provide policy information in plain language that is easy to understand. They must acknowledge your claim within five working days and keep you informed about its progress. They must explain any claim decision clearly and tell you how to challenge it. And they must have a transparent internal complaints process.
The Code was updated in 2024 to strengthen consumer protections around claims handling, vulnerability, and natural disasters. These updates reflected lessons learned from events such as Cyclone Gabrielle and the Auckland Anniversary floods, where many policyholders experienced long delays and communication breakdowns.
While the Fair Insurance Code does not have direct legal force in the way that legislation does, it carries weight. If your insurer breaches the Code, that can be a factor in how the IFSO assesses a dispute. It also serves as evidence of industry-accepted best practice, which can be relevant in legal proceedings.
Some car insurance brands operating in NZ may not be ICNZ members. In those cases, the Fair Insurance Code does not apply - but the insurer is still bound by the legislation and FMA regulations that set the legal floor for consumer protection.
| Area | Your Rights (What the Insurer Must Do) | Your Obligations (What You Must Do) |
|---|---|---|
| Buying a policy | Provide clear, plain-language policy information before you commit | Read the policy documents and understand what is and is not covered |
| Disclosure | Ask clear questions to help you provide accurate information | Answer all questions honestly and completely - do not withhold relevant details |
| Claims handling | Acknowledge your claim within 5 working days; process it fairly and promptly | Report claims promptly; provide accurate information and cooperate with the assessment |
| Claim decisions | Give clear reasons if a claim is declined; explain how to dispute the decision | Provide supporting evidence such as photos, receipts, and police reports |
| Complaints | Have a transparent internal complaints process and respond within set timeframes | Raise your complaint directly with the insurer before escalating to the IFSO |
| Cancellation | Refund any unearned premium when you cancel | Give notice as required by the policy terms |
| Vulnerability | Take extra care with customers experiencing vulnerability (financial hardship, disability, language barriers) | Let the insurer know if you need additional support or accommodations |
The duty of disclosure is one of the most important concepts in car insurance. In simple terms, it means you must be honest and upfront with your insurer when applying for a policy and when making a claim. If you fail to disclose something material, your insurer may be able to decline your claim or cancel your policy entirely.
Under the Contracts of Insurance Act 2024, the rules around disclosure have been modernised. Previously, the onus was largely on you to volunteer any information that a "prudent insurer" would want to know - even if you were not specifically asked about it. This was a high bar that caught many policyholders out.
Under the new Act, the duty has shifted. For consumer insurance contracts (which includes personal car insurance), the obligation is now to take "reasonable care" not to make a misrepresentation. In practice, this means you must answer the insurer's questions honestly and accurately. You are no longer expected to volunteer information you were not asked about, as long as you answer truthfully when asked.
This is a significant change that benefits policyholders. It means insurers need to ask the right questions rather than relying on consumers to guess what might be relevant. If an insurer's application form does not ask about something, they generally cannot later use it as grounds to decline a claim.
However, this does not mean you can be careless. If you know something is clearly relevant to your car insurance - for example, a previous insurance claim, a serious driving conviction, or modifications to your vehicle - and you deliberately withhold it, that can still have consequences. The test is whether a reasonable person in your position would have disclosed the information.
Common areas where disclosure matters for car insurance include your claims history, driving convictions and licence status, who else drives the vehicle, modifications or accessories, how the vehicle is used (personal vs business), and where the vehicle is kept overnight. If you are unsure whether something needs to be disclosed, the safest approach is to mention it. You can always contact your insurer and ask.
Just as you have a duty to be honest with your insurer, they have obligations to be transparent with you. NZ law and the Fair Insurance Code require car insurers to disclose key information at various stages of the relationship.
Before you buy a policy, your insurer must provide a product disclosure statement or equivalent information that clearly sets out what is covered and what is excluded, the excess amounts that apply, any conditions you need to meet to maintain your cover, how to make a claim, and how to make a complaint. Under the Financial Markets Conduct Act, this information must not be misleading or deceptive.
When you make a claim, your insurer must keep you informed of the progress and give you realistic timeframes. If they need additional information from you, they should tell you promptly. If they appoint an assessor or investigator, they should let you know.
If your claim is declined, the insurer must provide a clear written explanation of why, referencing the specific policy terms or conditions that apply. They must also tell you about your right to dispute the decision through their internal complaints process and, if that does not resolve the matter, through the IFSO.
At renewal, your insurer should clearly communicate any changes to your policy terms, cover, or premium. If your premium has increased, you are entitled to ask why. Common reasons include changes in risk factors, claims history, or market-wide adjustments. While the insurer is not required to give you a line-by-line breakdown of their pricing model, they should be able to explain the key factors.
If your insurer fails to meet these disclosure obligations, that failure itself can be a basis for a complaint. The Consumer Protection website has further information on what financial service providers must disclose.
Having your car insurance claim declined is one of the most frustrating experiences a policyholder can face. Understanding the common reasons claims are declined - and what your options are if it happens - is an important part of knowing your rights.
The most common grounds for declining a car insurance claim in NZ include the event not being covered under your policy type (for example, claiming for mechanical breakdown on a standard car insurance policy), a policy exclusion applying (such as driving under the influence of alcohol or drugs), non-disclosure of material information (such as failing to mention previous claims or a licence suspension), failure to meet policy conditions (such as not having an immobiliser fitted when one is required), and the claim relating to wear and tear, gradual deterioration, or a pre-existing condition.
If your claim is declined, your insurer must tell you the specific reason, including which policy terms or conditions they are relying on. A vague or general decline is not acceptable and is grounds for a complaint. You can read more about the claims process in our guide to making an insurance claim.
Under the Contracts of Insurance Act 2024, insurers cannot rely on technical or minor breaches to decline a claim if the breach did not contribute to the loss. For example, if your policy requires you to garage your car overnight and you parked it in the driveway on the night it was stolen, the insurer would need to show that the breach actually contributed to the theft in order to decline the claim.
This "proportionate remedies" approach is one of the most consumer-friendly aspects of the new legislation. It prevents insurers from using trivial policy breaches as a reason to avoid paying legitimate claims. The remedy must be proportionate to the breach - so a minor or inadvertent breach should not result in a complete claim decline.
If you believe your claim has been unfairly declined, do not simply accept the decision. Start by requesting a formal internal review, then escalate to the IFSO if needed. Our guide to complaining about your insurer covers this process in detail.
If you are unhappy with how your car insurer has handled your policy or claim, New Zealand has a clear and structured complaints process. The system is designed to be accessible - you do not need a lawyer, and the key dispute resolution service is free.
The first step is always to raise the issue directly with your insurer. Every insurer operating in NZ is required to have an internal complaints process. Contact their complaints team, explain the problem clearly, and state what outcome you are looking for. Keep a written record of all communications. Your insurer should acknowledge your complaint and provide a timeframe for their response.
If the internal process does not resolve your complaint, the next step is the Insurance & Financial Services Ombudsman (IFSO). All licensed insurers in NZ are legally required to belong to an approved dispute resolution scheme, and the IFSO is the main one for insurance. The service is completely free for consumers.
The IFSO will review both sides of the dispute, examine your policy terms, and consider the relevant law and industry codes. Most complaints are resolved through negotiation or mediation. If that does not work, the IFSO can make a formal decision that is binding on the insurer for amounts up to $350,000. The decision is not binding on you - if you disagree with the IFSO's outcome, you can still take the matter to court.
Beyond the IFSO, other avenues include the Citizens Advice Bureau for general guidance, Community Law Centres for free legal advice, and the Consumer NZ website for research and provider ratings. For disputes over $350,000 or matters outside the IFSO's jurisdiction, the courts are the next step.
The Consumer Protection website also has a useful overview of the insurance complaints process and your options at each stage.
How to escalate a car insurance complaint in New Zealand
Contact your insurer's complaints team directly. Explain the issue in writing, include your policy and claim numbers, and state the outcome you are seeking. Ask for your complaint to be formally logged.
If the initial response does not resolve the issue, ask for the complaint to be escalated to a senior complaints handler or internal disputes team. Request a written final response (deadlock letter).
If the internal process has not resolved your complaint (or your insurer has not responded within two months), contact the IFSO at 0800 888 202 or via ifso.nz. The service is free.
The IFSO will review the facts, your policy, and both sides of the story. Most disputes are resolved through negotiation or mediation at this stage.
If mediation does not resolve the complaint, the IFSO can make a binding decision on the insurer for amounts up to $350,000. This decision is not binding on you.
If you are not satisfied with the IFSO outcome, or if the dispute exceeds $350,000, you can take the matter to the Disputes Tribunal (up to $30,000) or the courts.
The Financial Markets Authority (FMA) is the government regulator responsible for overseeing financial service providers in New Zealand, including car insurers. The FMA's role is to promote fair, efficient, and transparent financial markets - and that includes making sure insurers treat their customers properly.
Under the Financial Markets Conduct Act 2013, all insurers operating in NZ must be licensed by the FMA. To maintain their licence, they must meet ongoing conduct obligations. These include dealing with customers fairly and in good faith, not engaging in misleading or deceptive conduct, ensuring marketing and advertising is accurate, and belonging to an approved dispute resolution scheme.
The FMA has been increasingly active in the insurance space. In recent years, it has focused on areas including claims handling practices (particularly after natural disasters), the use of unfair contract terms in insurance policies, conduct towards vulnerable customers, and the sale of add-on insurance products. The FMA has the power to investigate insurers, issue warnings, and take enforcement action where it finds breaches of the law.
While the FMA does not resolve individual consumer complaints (that is the IFSO's role), it does want to hear about systemic problems. If you believe your car insurer is engaging in conduct that could be affecting multiple consumers, you can report it to the FMA through their report misconduct page. This kind of reporting can trigger broader investigations that benefit all policyholders.
The FMA also publishes guidance and research that is useful for consumers. Their website includes information on consumer rights, how to check whether your insurer is licensed, and what to do if something goes wrong. It is a good resource to bookmark alongside the IFSO.
The biggest recent change to insurance law in New Zealand is the Contracts of Insurance Act 2024 (also referred to as the Insurance Contracts Act). This legislation replaced the outdated Insurance Law Reform Acts from the 1970s and 1980s and brought NZ insurance law into the modern era.
The Act introduces several important changes that benefit car insurance policyholders. The shift from a strict duty of disclosure to a duty to take "reasonable care" not to misrepresent is one of the most significant. As covered earlier in this guide, this means insurers must ask the right questions rather than expecting consumers to volunteer information unprompted.
Another key change is the introduction of proportionate remedies. Previously, even a minor or innocent breach of a policy condition could lead to a complete claim decline. Under the new Act, the insurer's remedy must be proportionate to the prejudice they have suffered. If a breach is innocent and did not contribute to the loss, the insurer may not be able to decline the claim at all.
The Act also addresses unfair contract terms in insurance policies. Terms that create a significant imbalance in the parties' rights and obligations, to the detriment of the consumer, may be considered unfair and unenforceable. This gives consumers and the courts a tool to challenge policy terms that are unreasonably one-sided.
Other notable provisions include clearer rules on policy cancellation, requirements for insurers to provide information in plain language, and stronger obligations around claims handling timeframes. The Act also introduces a requirement for insurers to handle claims in a reasonable and timely manner, giving policyholders a statutory basis for complaints about delays.
The Consumer NZ website and the Citizens Advice Bureau are good sources for plain-language explanations of how these changes affect you in practice. The ICNZ has also published guidance on how the industry is adapting to the new requirements.
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