Tuesday, September 05, 2006

Tied arrangement is illegal in New Zealand

I told an insurance CEO from New Zealand about the practice in Singapore, where the car distributor has a tied arrangement with an insurance company and the car purchaser is force to take insurance from this tied insurer.

My visitor said that this type of arrangement is illegal in New Zealand. The car owner must be given the choice of the insurer that they wish to go to.
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3 comments:

Han said...

Yes, in Australian and New Zealand, this type of tying is considered a vertical agreement that would restrict competition. This sort of arrangement falls foul of competition laws.

September 05, 2006 5:34 PM
Vitali Zagorodnov said...

I think there is a difference between requiring you to purchase insurance with the car and giving you incentive to purchase insurance with the car (by providing a discount). The former is clearly illegal, but I am not so sure about the latter. When we bought our car 1.5 years ago, we were offered substantial discount if we took up the AXA insurance with it. But it was never a requirement.

I think some car dealers are abusing this by citing you a price with the discount included and then telling you the price goes up if you don't take up the offer. While it is equivalent to the discount scheme, psychologically it feels like they are increasing the price just because you decided to go with other insurer.

Btw, we are now back with Income, much cheaper option than AXA.

September 05, 2006 5:48 PM
Justin Lim said...

Why all these fuss?

I agree with professor z, it is only an incentive to get what the car-dealer offer. You can always pay a higher premium and get another company's policy. However, would you want to pay a higher premium? My take is "NO".

September 08, 2006 10:25 PM

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