Huge variation in insurance rates for cars

Jessica Jarman. Photo / Janna Dixon

It pays to shop around for car insurance because premiums can vary by up to $1000 between firms.

The enormous range has prompted a call for "pay-as-you-drive" insurance, an Australian model in which premiums are linked to mileage, rewarding drivers who use their cars least.

The Herald on Sunday obtained quotes from five providers for three packages.

The first, a 25-year-old female in Grey Lynn wanting to insure a 1996 Toyota Starlet, could obtain insurance from the AA for $637.66.

Going through Westpac, the insurance would cost $1665, more than $1000 more.

A North Shore couple in their late-30s who want to insure their 2005 Honda Odyssey would pay the lowest with AA Insurance. The price is almost three times as much at AMI.

The range was narrower for a 54-year-old in Remuera insuring his new Audi A4, but the highest price, from Westpac, was almost double the lowest, from State.

Insurance Council of New Zealand chief executive Chris Ryan said many factors contribute to the variations.

"It's the nature of competition - but they need to make sure that cheapest one offers the same coverage as the most expensive one - and it probably won't."

Plus different providers target different markets.

In Australia, former insurance company boss David Issa has used his insider knowledge to launch the country's first website offering league tables.

He told the Daily Telegraph that providers relied on about 80 per cent of motorists renewing policies because it was too much trouble to shop around. Similar tables had been available for 10 years in the UK, where only 40 per cent of drivers stuck with the same insurer year after year.

Insurance expert John Grant surveyed New Zealand car insurance for website interest.co.nz last year and found premiums varied hugely.

Grant urges consumers to take advantage of the competitive market and shop around.

He predicts pay-as-you-drive insurance will reach New Zealand.

"Instead of buying an annual policy you buy so many kilometres of insurance coverage."

Consumer NZ provides an interactive database for members to compare premiums online.

Westpac head of insurance Kevin Crowley says the bank plans to review its vehicle premiums to ensure it's competitive.

Tower head of product and marketing Mike Clapp says car insurance shouldn't be looked at in isolation because customers often buy package deals.

AA Insurance deputy general manager Martin Fox says consumers should shop around because the industry is becoming more competitive.

John McSweeney of AMI said each insurer set its own criteria for premiums based on its experiences and where it wants to be in the market.

State's owner IAG did not return calls.

Hunt for the best provider in town

When Jessica Jarman bought her new car, she wanted full insurance but was confused by the number of providers.

"My old car was just a little rust bucket that wasn't worth anything so I went for the cheapest third party I could get. But now I need to get full cover because it's a nice new car," says Jarman.

The 21-year-old medical receptionist went to her bank ASB first, but was mistakenly quoted far too much.

After shopping around, Jarman, who lives in Papakura, decided to go with AA Insurance for her 2005 Toyota Vitz. She pays $956 a year, just over $18 a week.

"It was actually the most expensive out of all of them but I've been using AA for years and they seemed like the most trustworthy," says Jarman.

"They ticked all the boxes and they seemed to offer a lot more cover."