Disgruntled about insurance

With reference to last Sunday's case under the above heading I contacted Geoffrey Bezzina at the Malta Financial Services Authority (MFSA). He was very co-operative and here follow his comments on Mark Vassallo's case and the insurance issue:

In summary, Mr Vassallo has complained that he is unable to find an insurance company that would give a refund for the motor insurance premium to his son on reaching his 25th birthday.

It is rather strange that Mr Vassallo's insurer and the "several motor insurance companies", which he claims he has contacted, refused to give a refund to his son (who appears to be the main policyholder and not a named driver under Mr Vassallo's motor policy).

From the various consumer queries the MFSA's Consumer Complaints Unit receives, we are aware that a number of insurers give a refund to their clients on attaining the age of 25 during the period of insurance or alternatively charge additional premium on a pro rate basis until they reach the age of 25.

In this respect, allow me to explain what normally happens in cases similar to Mr Vassallo's. Generally speaking, annual premium is revised on renewal taking into account facts such as vehicle use, drivers' ages and claims experience, which could change during the preceding year.

Many insurers would normally apply additional premium (usually referred to as "loading") on the basic premium for drivers aged 22 to 24 (some insurers may apply a higher loading for younger drivers).

Loadings charged by the market vary from company to company - as should be the case. Some companies may also make a distinction between loadings where the young driver is the principal driver and when the young driver is an additional named driver.

When a driver celebrates his 25th birthday, this 'loading' is normally waived. It is not only the additional premium that is affected. Many insurers would also, for example, reduce the excess which may be payable in the event of a claim.

In effect, this means that the policy would need to be amended and an endorsement with the relevant changes would have to be issued.

Some insurers would advise that, as soon as the principal driver or any of the additional named drivers under a motor policy turns 25, the principal driver would be required to submit a request to the insurer for a pro rata refund of the premium.

Such a request may be done in writing and some insurers may also ask for a copy of the identity card of the 25-year-old driver. In the process, the insurer would also issue an endorsement to the policy.

Some insurers would insist that the request for a refund be made by the main policyholder, rather than the additional named driver, even if it is the latter who has reached 25.

No refunds would usually be accepted when the policy does not name the drivers (in this instance, the policy would allow any driver over 25 to drive the vehicle and by default, drivers under 25 would not be covered under the policy).

Some insurers would not normally accept a request for back-dated pro rata refunds. For example, a policyholder who informs his insurer, say, two months after his turning 25, cannot expect the refund to be so backdated.

We understand that some insurers may, on renewal, be in a position to calculate the exact annual premium - i.e., for the time the loading is applicable and for that when it is not - without the need for the policyholder to ask for the refund. Not all insurers offer this arrangement.

Insurers may not be able to give a refund on stamp duty in the event of a refund on premium. More information about this aspect may be obtained from the insurance companies.

Lastly, it is important to shop around for the policy that best suits one's needs. A policyholder may also seek the services of an insurance broker who would be able to provide advice about the various insurance policies available on the market.

It is also important for the policyholder to ask for a written quotation before renewal, and to inform an insurance company about any changes that may occur during the period of insurance.

I hope I have provided Mr Vassallo with a satisfactory explanation to his query. That said, Mr Vassallo and your readers are invited to contact the MFSA's Consumer Complaints Unit by e-mail consumerinfo@mfsa.com.mt or freephone 8007-4924 if they have any queries or complaints on financial services. More information is also available on www.mfsa.com.mt/consumer. (Geoffrey Bezzina)

I thank Mr Bezzina for his co-operation. We discussed this issue in depth. You can contact him on such queries on 2548-5313 and/or e-mail: gbezzina@mfsa.com.mt.

Mr Bezzina is deputy director, Consumer Complaints Unit, at the MFSA.