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In New Zealand, your bank can sell you car insurance without being the company that actually insures your car. The key distinction is between the company that sells or arranges an insurance policy and the company that takes on the financial risk if you make a claim.

Banks often offer insurance as an additional service to their customers, even when the insurance itself is provided by a separate insurance company.

How does it work?

There are three common arrangements:

1. Your bank acts as an insurance intermediary. The bank sells or arranges the policy on behalf of an insurance company. You deal with the bank when purchasing the policy, but another company actually insures your car.

2. Your bank partners with an insurer. The bank promotes an insurance product under its own brand or as part of a partnership. The partner insurance company provides the cover and is responsible for paying valid claims.

3. Your bank sells insurance under its own brand. The policy might carry the bank's name, but the legal documents should identify the actual insurer. In some arrangements, a separate company within the same corporate group provides the insurance.

The important point is that selling insurance and underwriting insurance are two different activities. Underwriting means accepting the financial risk covered by the policy.

Is this legal in New Zealand?

Yes. New Zealand law recognises insurance intermediaries, including businesses that arrange insurance policies on behalf of insurers or customers.

The Reserve Bank of New Zealand (RBNZ) regulates insurers and generally requires companies carrying on insurance business in New Zealand to be licensed. Businesses that simply arrange or promote insurance can operate as intermediaries without themselves being the insurer. Source: RBNZ guidance on insurance licensing.

Who pays if you have an accident?

Imagine your bank sells you comprehensive car insurance for $1,200 a year.

• You pay the premium through the bank.
• The bank may receive a commission for arranging the policy.
• A separate insurance company accepts the risk.
• If you have an accident, the insurer named in your policy is generally responsible for paying valid claims, subject to your policy's terms and conditions.

The bank may still help you manage your policy or contact the insurer, depending on the arrangement.

How can you find out who actually insures your car?

Check your policy documents, particularly the policy wording, certificate of insurance, or policy schedule.

Look for:

• Insurer: The legal name of the company providing the insurance.
• Distributor or intermediary: The bank or other business selling or arranging the policy.
• Claims process: The company you should contact if you have an accident.

You can also check the insurer against the Reserve Bank of New Zealand's register of licensed insurers.

One important distinction

Your bank's name on the policy doesn't necessarily mean your bank is financially responsible for your claims. What matters is the legal arrangement and which company has accepted the insurance risk.

Which bank are you with? If you tell me whether it's ANZ, ASB, BNZ, Westpac, Kiwibank or another bank, I can help explain who actually underwrites its car insurance and what that means for you if you need to make a claim.