Full comprehensive cover still has some pitfalls
The debate about the profitability of short-term insurers’ motor books has raged unabated through the first half of 2010. Insurers have finally realised they have to tackle the twin challenge of escalating motor repair and replacement costs and the dwindl
Your short-term motor insurance policy is a contract between yourself and your short-term insurer. In return for a monthly premium – usually assessed on an annual basis – the insurer protects you against unexpected events (or risks) as stipulated in your policy document. But be warned. Insurer may refuse to settle a claim because of an exclusion or breach of policy condition! You cannot, for example, rely on your full comprehensive insurance to compensate you in the event damages are caused by gross negligence. Your claim might be refused if your insurer can show you intentionally disregarded a situation where a loss was probable.
The Ombudsman has other ideas
There are plenty of examples where the Ombudsman for Short-term Insurance has instructed insurers to pay up despite obvious negligence on the part of the insured. A couple of cases spring immediately to mind. In the first an insured rolled her car while travelling well in excess of the national speed limit. Her insurer refused to pay the claim because of an undertaking in the policy wording by the insurer to drive sensibly… The Ombudsman overturned the insurers’ decision and ordered them to pay. In much the same way, the driver of a 4x4 vehicle was compensated after unsuccessfully negotiating a water hazards.
But gross negligence isn’t the only reason an insurer might try and side-step an expensive claim for damages. Gari Dombo, Managing Director at Alexander Forbes Insurance, touched on 10 reasons which could result in a short-term motor claim rejection. Pay close attention to each of these points and you’ll be covered against any eventuality.
10 Ways to void your motor insurance (with thanks to Alexander Forbes Insurance) – FAnews comments in italics…
1. Driving under the influence of alcohol or drugs: Motor insurers will not pay out if you were driving over the legal blood alcohol limit, or tested positive for misusing drugs. Some policies simply state ‘while driving under the influence’ while others specify a limit. Certain insurers will even reject your claim if you lend your car to a person who is under the influence, whether you’re aware of this or not. We agree wholeheartedly with zero tolerance on alcohol abuse, and often wish insurers and traffic authorities were tougher on offenders.
2. Suspended or cancelled license: Your insurer won’t pay up if they find out that you do not have a valid drivers’ license at the time of the accident. Driving without a license is viewed as a contravention of the law and insurance doesn’t cover any illegal activity. Certain insurers will go further and reject a claim if a person you lend your car to is unlicensed, even if you didn’t know. This works great on paper, but has been criticised due to problems at vehicle licensing centres in testing new license candidates, and re-issuing existing licences. The department of transport needs to get the administration at these centres spot on.
3. Allowing a friend to drive a vehicle: If you allow a friend or anybody to drive your car without informing your insurer, you may end up footing the bill for an accident. This is because some insurers only cover your vehicle when operated by nominated drivers.
4. Failing to report an incident to the police within 24 hours: Most insurance policies clearly state that you have to inform the police within 24 hours if you are involved in an accident, or if your car has been stolen. No problem with this one – all you need to do to get full police cooperation is to let them know the case is ‘just for insurance’.
5. Not taking your car for an inspection: With certain insurers, if you are insuring a newly acquired or used car or have decided to change insurance companies you may need to take your car for an inspection. They want to see that your vehicle exists and that it is not damaged. If you have not done this, your claim may be rejected. This provision has been the case of numerous complaints too… If it’s a condition of your insurance make sure you comply – and make sure you tell your clients of the provision too – preferable in writing.
6. Not Installing security devices: Some insurers will not pay you out if you have not installed the standard security devices in your vehicle that they require, like an alarm and immobiliser or a tracking and recovery system. This kind of dispute often ends up in the Ombudsman office. It seems there’s a good risk of non-compliance even if you possess a security certificate. We suggest getting copies of your security device installation certificates and clearing them with the insurer in writing – that leaves no wriggle room at claims stage.
7. Car modifications: You need to inform your insurer whenever you modify your car to change its performance. They would need to know for example, when you have modified the engine or added turbos as this may affect the rate that is charged. If you have installed a new sound system, mags or other accessories, these may not be covered unless you advise first.
8. Driving across our borders: There is no cover when you drive beyond the territorial limits stipulated in your policy. Most insurers cover you within the borders of South Africa and in immediate surrounding countries. If you plan to drive out of the territorial limits of your policy you need to have cover extended for where you are going.
9. Using a vehicle for business purposes: Check the ‘use description’ that applies to your vehicle carefully. Insurers differ in their use descriptions and you may not have the cover that you think. Private Use might refer to driving to and from work and attending the occasional meeting – but not all policy wordings are the same. The insurer must get a sense of how far the vehicle will be driven. Sales reps use their vehicles for business purposes all the time with a higher chance of being in an accident compared to a pensioner who never drives in peak hour traffic. The business versus private debate is at the heart of numerous insurance claim disputes. Take the time to discuss this with your broker and insurer and get it right before you have an accident!
10. Relocating and changing parking areas: If you decide to move to a new flat or buy a new house, it is very important that your insurer knows about your new location and parking arrangement. The changed circumstances can affect your risk profile and rate. You must also make sure your insurance policy correctly reflects your existing parking arrangement. If you state your car is parked in a locked garage when you actually leave it in the street, you’re looking for trouble...
Prevention is better than cure
We’ve been writing about insurance for some time, and very few short-term insurers (and brokers) would ‘blanket refuse’ claims based on the above points. There are always extenuating circumstances – reasons for leniency – and complications which would result in the claim being paid. It makes sense to go through the ten points above and make sure your insurance policy is as ‘clean’ as possible. Avoid the commonsense mistakes and ensure a hassle free short-term motor insurance experience for all! “Once you have read and understood the policy and you are still unhappy about your insurers’ decision not to settle your claim, you can always approach the Office of the Ombudsman for Short-term Insurance,” advises Dombo. The Ombudsman acts as a mediator between unsatisfied clients and their insurance companies.
Editor’s thoughts: Keeping both insurer and insured happy should be the simplest of tasks. But whenever large sums of money are involved tempers soon become heated. Have you run into problems with claims due to any of the ten points mentioned today? Add your comments below, or send them to [email protected]
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