Insurance Doesn’t Cover Everything

The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) is reminding consumers that insurance doesn’t cover absolutely everything.

“Every year we see complaints from people disappointed that their insurance isn’t covering them for what they thought it would,” says Karen Stevens, Insurance & Financial Services Ombudsman.

“We Kiwis are notorious for our ‘she’ll be right’ attitude when it comes to insurance. But when claim time comes, we can be in for a big shock if we are expecting something different to what we’ve actually signed up for,” says Stevens.

A recent complaint investigated by the Scheme, published in the IFSO Scheme’s annual report released this week, was made by a woman whose car insurance claim had been declined.

In 2024, Stacey’s* car broke down because AdBlue, a diesel exhaust fluid, had been put into its fuel tank. AdBlue is stored in a tank near the normal fuel tank, accessed through a different cap. If AdBlue is put into a car’s fuel tank, it can cause mechanical damage to the car.

Stacey made a claim to her insurer for the damage, saying “I broke down due to AdBlue being put into my car accidentally”. Lots of consumers think, if it’s accidental, the insurer will pay – but that’s not always the case.

The insurer declined her claim, because of an exclusion in the policy for incorrect fuel or additive being used.

Stacey complained to the IFSO Scheme, however it was unable to uphold her complaint, because the insurer had correctly applied the terms and conditions of the policy to the claim. While the policy covered accidental events, it specifically excluded situations where an additive like AdBlue had been used.

“The cover is set out in the terms and conditions of each policy and, generally, it is up to consumers to read and understand these terms and conditions. If they don’t like them at the outset, it’s the right time to shop around,” says Stevens.

The IFSO Scheme provides a free service for consumers who have insurance or financial services complaints. In the last year, it investigated the highest number of complaints in its almost 30-year history, with a total of nearly 5,000 cases and 479 complaints for investigation.

“Consumers should read their policies and understand, first, what cover they have and, second, the limitations on that cover or the exclusions,” says Stevens.

“My advice is to ‘take time before you sign’ – keep asking your insurer or broker questions until you fully understand, and always get hold of the policy and work out what will and won’t be covered,” she says.

“Other things that often surprise consumers are things they expect to be covered for but find they are either not covered, or covered for a much lesser value than they expect. The most common examples are gradual damage, wear and tear, the decreasing value of a car, damage caused by bugs or pests, theft by a flatmate, and valuable items (like jewellery or electronics) that aren’t specifically listed on the policy. It’s worthwhile knowing about these limitations on cover, before you make a claim,” she says.

People can make a complaint to the IFSO Scheme at www.ifso.nz or by calling 0800 888 202.

*Name has been changed

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