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The insurance industry says the Government is mistaken if it believes compulsory third-party car insurance will stop boy racers.
Transport Safety Minister Harry Duynhoven, who backs compulsory third-party insurance, has officials working on proposals to take to the Cabinet which he believes will change the behaviour of drivers.
Since the death of 20-year-old Scott Finn in Mt Maunganui on Saturday in an illegal car race, the Government has come under pressure from a mayoral task force pushing for alcohol bans and a review of car licensing and purchasing laws.
Mr Duynhoven said countries such as Australia, Germany, Britain and the Netherlands all had less of a problem with street racers because people needed insurance to buy a vehicle, and having affordable insurance depended on having a good driving record.
Insurance Council chief executive Chris Ryan said insurance companies would find a way to implement the policy, at a profit, if it became compulsory. But he said the industry had already told Mr Duynhoven it might not achieve the outcome he wanted.
"At first glance it's a good idea but it is more complex and more difficult than people realise. If it is an attempt to take street racers off the road then it is probably not going to work."
Many of the people compulsory insurance was aimed at already broke the law by being without one or more of a valid driving licence, registration or warrant of fitness. "Bringing in another compulsory requirement won't get them off the road."
The industry estimates that one in five New Zealand drivers have no insurance on their vehicles. There are 3.2 million vehicles in the country
Mr Ryan said that if a person could not buy a car without third-party insurance, problem owners would most likely take out insurance - then not pay the premiums. And premiums for young drivers would rise steeply.
"You are going to require insurers to take on some real high-risk dangerous people."
But Mr Duynhoven is convinced that compulsory third-party insurance, which covers damage to someone else's car, would change behaviour.
He said drivers would get the message that they needed insurance if they wanted to be on the road.
"That very soon changes behaviour because people realise they are not in a position to drive if they have a lot of speeding tickets, a lot of vehicle offences, or a vehicle which is modified with a very high premium."
He acknowledged that some drivers did not care if they broke the law but they would if their car was impounded because it did not have insurance.
Mr Duynhoven said New Zealand had a combination of no third-party insurance, no restriction on what a young person could buy, relatively cheap cars from Japan and finance deals that helped them to buy the cars with a guarantor.
In response to Christchurch Mayor Gary Moore's call to consider crushing confiscated street racing cars, Mr Duynhoven said confiscation was already working "very well," with about 2000 cars impounded last year.
"When you are a youngster and your car is your most important asset ... losing it is a very big deal."
