Low-income earners who borrow money on a car can get it insured for $8 per week.
As part of a trial, financial charity Good Shepherd and general insurer Vero are providing cheaper car insurance for people who borrow up to $5000 to buy a car.
Costing $8 per week, the insurance covers repair and replacement of the car up to the loan value. It includes accidental damage to someone else's car or property (third-party liability) and no excess on the first claim.
Before the product was developed, the companies undertook research to understand how accessibility and value were viewed by low-income Kiwis. In one case, a person earned less than $50,000 a year but due to damage caused to another car, had been hit with a repair bill well over that.
Jimmy Higgins, CEO of Suncorp which owns Vero, said research showed peoples' values and background meant they had different views about risk. For people on low incomes, third-party car insurance offered no real value, with many seeing protecting people as more important than protecting a material possession.
"Our challenge is to find ways to ensure that those differences are not a barrier to New Zealanders...for some families, a car is more than a possession, it’s a connection: to work, family, wellbeing, church, community," Higgins said.
Good Shepherd chief executive Fleur Howard said many clients who borrowed money to buy a car relied on it to get to work. If they had an accident, they'd have to keep making repayments on something they couldn’t afford to fix or replace - a financial "double-blow".
“Not only do they not have the money to repair or replace the car, but their ability to get to work is affected because they often work irregular hours outside of accessible public transport schedules,” Howard explained.
The car insurance product, called 'drive car insurance' will be used as part of a test to gauge whether there's a place for low-cost car insurance among Kiwis with limited incomes.
Available as a trial for an initial period of 12 months, insurance premiums are fixed at $8 per week. It's available to drivers who meet license conditions who take a no or low interest loan through Good Shepherd. The income threshold to qualify for a loan is less than $42,106 per year, $43,784 for a couple, or $75,945 for a family of four.