It is incredibly frustrating to pay your premiums every month, only to feel like you’re being bullied or manipulated when it’s finally time to make a claim. The insurance industry uses clever marketing, but the reality of how they handle claims boils down to cost control and risk management.
From talking to customers and workshops, here are some of the words and tactics used by insurance companies and what appears to be happening behind the scenes:
1. Why Can’t I Choose any Repairer Like They Advertise?
Many insurance policies market “choice of repairer,” but the fine print usually says “Choice of repairer subject to insurer approval.”
The Reality: When you try to use your own trusted mechanic or body shop, the insurer will often push back, stall, or make the approval process incredibly difficult.
- The Motive: They want to route you into their network because they have pre-negotiated, heavily discounted contracts with specific shops. If you go outside that network, the insurer loses control over how much the repair will cost them.
- Inside Strategy: If you want to use your own repairer, read your Product Disclosure Statement (PDS) carefully. If your policy explicitly states you have “Choice of Repairer,” hold them to it. Demand that they review your chosen shop’s pricing, and do not accept a cash settlement unless it fully covers the actual retail price provided by your shop.
2. What Do They Mean by “Not an Approved Workshop”?
When an insurer tells you a shop is “unapproved,” they are trying to make the shop sound unqualified or sketchy. In reality, it usually just means the shop refused to sign a low-cost contract with that specific insurance company.
- Approved Workshops: These shops agree to give the insurance company massive discounts on labour rates and often agree to use cheaper aftermarket or recycled parts instead of Original Equipment Manufacturer (OEM) parts to keep costs down.
- Unapproved Workshops: Independent shops often pride themselves on performing factory-standard repairs using brand-new, original parts and charging a fair retail rate for labour. They are “unapproved” simply because they refuse to cut corners to save the insurance company money.
3. The Risk of Hidden Damage (Supplements)
When an adjuster inspects the information provided to them (they generally never look at the car in person), they adjust their approval for what they can see or what they think might be required. Only the technicians at the workshop work on the vehicle; it’s likely they will find hidden, structural, or mechanical damage underneath.
- The Risk to them: If the insurance company manages the repair, the shop submits a “supplemental claim” for these extra costs, and the insurer pays it.
- The Cash Trap: If you accept a cash settlement, you sign a release. Any hidden damage discovered later comes entirely out of your own pocket.
4. They Can’t Warranty the Work with Unapproved Workshops?
This is a classic scare tactic. Insurers will say, “If you go to an unapproved shop, we cannot warranty the repairs.” The Truth: Insurance companies don’t fix cars; workshops do. The insurance company never actually warrants the physical work anyway—they just facilitate a guarantee through their contracted shops.
- When an NZ insurer says, “We can’t guarantee the work if you use your own shop,” they are not saying the work won’t be legally protected. They are simply saying, “Our corporate office won’t fight the battle for you if the shop messes up.”
- If you go to a reputable, high-quality independent shop, that shop will provide its own warranty on the parts and labour in line with NZ consumer law. The insurer uses this phrasing to make you feel unsafe and unprotected, even though a premium independent shop will often give you a better warranty than a high-volume insurance “preferred” shop.
- NZ Consumer Tip: Reputable independent repairers in New Zealand (especially those registered with the MTA – Motor Trade Association or the CRA – Collision Repair Association) will happily provide their own robust warranties on parts and labour that sit alongside your statutory rights under the Consumer Guarantees Act. You do not lose legal protection by backing yourself and choosing your own quality repairer.
5. Why Do They Push for a Cash Settlement for an Unapproved Workshop?
If you dig your heels in and insist on using your own independent shop, the insurer will almost always pivot and say, “Fine, but we will cash out for an adjusted settlement figure, and you deal with them.” They push for this cash settlement for two distinct reasons:
- Capping Their Financial Loss: If your independent shop uncovers hidden damage later, the insurer is off the hook. They paid you a flat fee, and their file is closed.
- Squeezing the Payout: They will base the cash settlement on their cheap network rates (e.g., $75/hour for labour using aftermarket parts), knowing full well your independent shop charges retail rates (e.g., $90/hour using OEM parts). They essentially underpay the claim and force you to pay the difference out of pocket.
- Fair and Reasonable Cost for the Repair: The insurer will likely dispute that their payout reflects a “fair and reasonable” cost for the repairs. However, this cap effectively restricts your choices, forcing you to use their preferred network or pay out-of-pocket to cover the difference at your chosen shop. In practice, this is just a subtle way for the insurance company to dictate where your vehicle is repaired. If this logic worked both ways, consumers would be able to dictate what they consider a “fair and reasonable” premium for their policy—an offer the insurance company would undoubtedly reject.
6. Why Do You Carry All the Risk After You Paid for Insurance?
It feels entirely unfair. You bought insurance precisely to transfer the financial risk of the unexpected away from yourself.
However, the moment you accept a cash settlement, you legally agree to a “full and final release” of that claim. By handing you cash, the insurance company has legally fulfilled their contract for that specific accident.
- The Risk Shift: You are no longer just a customer; you effectively become the project manager of your own car repair. If the parts are delayed, you pay for the rental car. If the repairs are done poorly, you have to fight the shop yourself. If the car is found to have structural damage that makes it unsafe, you absorb the loss.
