I poked around some more and at one fairly typical looking company, you're liable for $1000, and the insurance is $10/day. That's ridiculous.

I agree with the comment about Mexico, no sane person drives there without local insurance, since otherwise you run the risk of waiting in jail until responsibility is determined. But I would hope that NZ law would be more like UK law, and I'd be at most at risk for the thousand bucks.