Motor insurance

I have written before about motor insurance, covering also other insurance policies available in Malta. It is not my intention to cover a specific complaint but to make a series of observations about aspects that are detrimental to customers. It is a fact that you cannot own a vehicle without insurance and with this in mind the insurance industry is making sure that the customer has no choice.

With satellite and cable TV you get to see adverts from the UK with each insurance agent competing for custom. However this is not the case in Malta where all insurance agents are governed by an association under the guidance of Dr Anton Felice. Prices and conditions are practically the same with only some minor differences.

The most serious matter in my humble opinion is the lack of respect for the Data Protection Act. I am enclosing a notice received by my wife with the insurance renewal notice. I strongly objected and was simply told that I have no choice. I believe that I have the right to confidentiality, and if any insurance company wants access to any information, the least they should do is to ask for my permission.

Another matter that takes the association of insurances away from the customer's interest is the matter of motorbike insurance. Not only was a hike in insurance premiums presented but you can only insure on third party liability. It is no use going to different agents. You still get the same reply, which makes my point that insurance agents have formed a cartel.

The same thing goes for some makes of cars like Toyota Glanza and Honda Del Sol. I was on the verge of buying such a car and was told it would be difficult to insure and impossible to get a full comprehensive cover. Just what the customer needs!

I had the misfortune of having my car stolen a few months ago. It was insured on a value set by the insurance provider. I made a claim and my nightmare started. At the outset, I had to provide a police conduct certificate that made me feel as if I were the culprit, not the victim. I was bluntly told that it would be difficult for me to get comprehensive insurance on another car. In fact I was told not to apply for insurance at this particular agent. When it came to payment, although I had insured for a specific amount, the settlement amount they had set was significantly less. I protested that they had accepted the premium for the amount stipulated however according to the small print in my policy the settlement amount would be the price of the car at the time of the claim. I have documents and e-mails to back all this up.

I am sure that the Insurance Association does not have the customer at heart. It only serves the interests of its members who cannot give the customer competition so long as they are members of the association. What I would like to see is a company that will operate away from the association and I will guarantee my custom as I am sure hundreds of others will. While thanking you for giving us consumers a medium to express our concerns, I assure you I will continue to follow your column. (Mario Caruana)

I referred this letter to Dr Felice (Malta Insurance Association) who replied:

Your correspondent is misinformed. It is not a fact that "prices are practically the same among insurers with only a few liri difference".

The prices available from various insurers for motor cover show that the product is available in a diversity of premium levels and cover benefits. To take the premium of a private car as an example, our statistics show that differences vary immensely, depending on the type of cover.

So it is an absolute falsity for your correspondent to imply that the Maltese consumer does not benefit from shopping around. Indeed, we are firm believers in competition since this encourages insurers to optimise on the services they offer and to search for the best ratio between price and quality.

Naturally, not every insured event presents the same risk profile and it is left to each individual insurer to analyse carefully the risk presented by his clients to determine whether and at what price he may reasonably cover them. A client with a poor claims experience or with a risk profile, which increases the probability of future claims, will inevitably pay a higher price.

Finally, your client refers to what he considers lack of respect regarding confidentiality. Again, this statement shows that your correspondent is not very well versed in the logic of insurance.

Insurance is a special case where certain forms of data sharing are encouraged. The more information that an insurer has about claims in the market, the more precisely it can calculate its expected cost and hence the more keenly it can price it. When there is inadequate information about a specific risk, insurers will be reluctant to provide coverage.

Your correspondent may however be referring to a different type of data sharing among insurers. This addresses the efforts which insurers take to prevent, detect and remedy insurance fraud.

Public attitudes to insurance cheats vary. For some people, the temptation to act dishonestly can prove too much. In the words of one fraudster, "It's justice money for all the years that I've paid without making a claim".

Insurers are determined to reduce the scale of insurance fraud to protect their policyholders. The majority of insurance claims are genuine; but honest policyholders pay for fraudulent claims. We therefore recognise that fraud can most effectively be tackled by working together on a market basis and this includes the sharing of information to check suspicious claims.

I therefore thank your correspondent for the opportunity he has given me through your medium to explain these basic requirements of insurance.

I thank Mr Caruana and Dr Felice for their letters, which constitute food for thought. Indeed an important issue well worth discussing openly.