The companies will have direct access to data held about a vehicle, including odometer readings, age and specifications, through a real-time computer interface that is being built. It is expected to be ready in 2015.

While consumers will be asked to give consent before the data is shared, the move has raised privacy concerns, amid a trend for government agencies and companies to increasingly collect and link personal data.

Allowing insurers access to the registry to sell Compulsory Third Party Insurance will reduce fraudulent insurance applications, such as drivers who claim a country garaging address for a vehicle kept in the city, said a Transport for NSW spokeswoman.

"Fraudulent insurance applications cost insurers millions of dollars a year and drive up the cost of premiums for all motorists," she said.

But the NSW Civil Liberties Council president Stephen Blanks said giving insurance companies access to a government registry through a regulation change "shows the dangers of creating databanks and function creep".

This occurs where a database of personal information is created for one purpose, but over time is used for more and more purposes.

"This can be done without any real public scrutiny at an agency level," Mr Blanks said.

The insurance industry has been pushing the NSW Government to allow it more flexibility in pricing Green Slips, or "risk rating", but denies this was behind the registry access.

Green Slip insurance premiums have risen 70 per cent since 2008 in NSW, as claims have increased. The O'Farrell government abandoned an attempt to reform the scheme through controversial legislation last year.

An Insurance Council of Australia spokesman said the registry information would be used by companies to give more accurate quotes.

An NRMA Insurance spokesman said: "It will enable customers to have a more seamless and faster transaction when they seek quotes for their Green Slips. This is for validation of customer data to ensure accuracy, not providing more rating factors for pricing."

The NRMA has been lobbying the NSW Government to be able to sell Green Slips and vehicle registration in one transaction.

A Motor Accidents Authority spokeswoman said insurers "will not be able to obtain any additional information beyond what they need to process the insurance transaction".

The Australian Consumers Association spokesman Matt Levey said businesses shouldn't access and collect more information from consumers than they need to provide a service.