Common complaints about motor insurance
The Complaints Unit of the Malta Financial Services Authority has issued a summary of the complaints it handled, which include a number of case studies. All relating to the insurance industry, they explain some of the complexities of the issues and...
The Complaints Unit of the Malta Financial Services Authority has issued a summary of the complaints it handled, which include a number of case studies. All relating to the insurance industry, they explain some of the complexities of the issues and also offer insight into how similar cases should be handled.
Case study 1
Complaints relating to delays in opening a claim by the party who allegedly caused the accident.
The background: Mr B was involved in a car collision with Mr A. Mr B explains that Mr A emerged from a stop sign. The wardens were contacted and subsequently drew up a report. Mr B is insured on a third party basis. He contacts his insurance company and is informed that he has to open a claim with Mr A's insurer. Mr B duly does so and is informed that Mr A had not yet contacted them about the accident. They promise to contact Mr A to "persuade" him to lodge a claim. Mr B is not happy with the situation. Given the extensive damages, the car was towed to a garage. He is lamenting the fact that the longer Mr A delays in filing a claim, the greater is the inconvenience he is enduring through loss of use of his vehicle.
Mr A's insurers confirm receipt of a copy of the warden's report and send their surveyor, on a without prejudice basis (i.e. without admittance of liability), to survey Mr B's vehicle. Mr A's insurers confirm that, on the basis of the warden's report, their client is to blame but unless their client files a claim and pays the excess (Lm100), they would not be in a position to accept liability and proceed with repairs. Moreover, should they accept liability, a replacement vehicle would be provided for the period the vehicle is being repaired and not when the vehicle is at a standstill waiting for parts to be sourced or, worse still, until Mr A decides to open a claim.
The redress: Mr B would be informed that in terms of law any insured party who has been involved in an accident and who might have suffered or caused any damage or injury should inform his insurer of the accident within two weeks of the event. Whenever an insurer believes there are reasonable grounds that he may have to pay a claim to an injured party but their insured fails or delays to open a claim, the insurer is obliged to treat that event as if a claim had been made.
In many instances, drivers like Mr A would lodge a claim with their insurer and would admit fault. In other instances, Mr A would lodge a claim but refuse to admit liability. In such situations, the insurer would advise Mr A that from the documentation at hand, it is likely that he was at fault. Mr A may accept or refuse the recommendation. If he disagrees with his insurer, he has to submit a reasoned opinion in writing and within a specific time frame (within 10 days of receipt of an insurer's written notice) as to why he is not accepting liability.
Failure to submit a reasoned opinion as to his refusal of liability normally leads the insurer to automatically honour the claim and proceed with repairing Mr B's car. However, in certain circumstances, the insurer will inform Mr B that Mr A is contesting payment of the claim. The matter will probably be referred to arbitration or any other appropriate tribunal.
Mr B will always be informed that the Consumer Complaints Unit is not an adjudicating body and that it will not be involved where liability has not been ascertained. Such cases fall within the remit of arbitration and Mr A would be recommended to seek legal advice (reference should be made to the legal provisions of the Motor Vehicles Insurance [Third Party Risks] Ordinance).
Case study 2
Do I have a right for a rented vehicle period when my car is out of action?
The background: Mrs C has been involved in a car collision with Mr D.
Mr D's insurer has accepted liability and starts the process for repairing Mrs C's car (which was towed to a repairer). It so happens that some parts are not readily available. Mrs C is furious because she depends on her car to go to work and for routine family chores. Mrs C contacts the Complaints Unit to learn about her rights.
The redress: This is always a much-contested issue. Insurers would normally inform third parties, such as Mrs C, that they would only provide a rented car during the period when the vehicle is being repaired (and not when it is actually out of action).
Almost invariably spare parts would be available and repairs would commence. On the other hand, if replacement parts were not available, the insurer that accepted liability would not extend the use of a car for the period in which the injured party is waiting for the parts to arrive. Indeed, sometimes it takes longer to source parts than to repair a vehicle. The injured party will find this objectionable as the more his vehicle is delayed, the more inconvenience he suffers. Claimants expect the insurance company to remedy their situation without delay - a fair and reasonable expectation, one would argue.
The unit's approach has always been to refer to case law and there are a number of cases in which the courts (including the Small Claims Tribunal) had concluded that an injured party should be reinstated in full and a victim has a right to recover the losses and to restore his property to its pristine original state from the guilty party.
A typical case to which reference is made is Percius Car Hire Ltd vs R. Schembri (October 20, 2003, Case 616/2001/1), wherein the Court of Appeal stated that a victim should (a) minimise his losses and (b) should not be saddled with additional burdens to reduce expenses. The victim has a right to recover the cost of a hired car for the period his car is out of action. Similarly, cases Anthony and Manuel Xuereb vs Noel Caruana (June 30, 2004, Case 655/2001/1) and Mario Psaila Savona vs Chris Zahra (March 17, 2006, Case 391/2005) confirmed the abovementioned principles.
The unit always informs injured parties that it is most important to keep the insurance company (or companies) informed at all times in writing of any issues arising from a claim (such as loss of use) and as to any efforts to source parts from any supplier. The Unit also recommends that the injured party should request the insurer (in writing) to confirm the maximum amount reimbursable for renting a vehicle per day, against receipt. The Unit would also explain that the rights of an injured party are not limitless. In this sense, an injured party cannot blame an insurance company for any delays if repairs are delayed for no valid reason.
A word of caution: The Consumer Complaints Unit treads very carefully when the case appears to be more complicated than the one outlined above. Reimbursement for loss of use is not an automatic right but depends on various factors including whether liability is confirmed, and when. An injured party can always claim reimbursement for loss of use by instituting proceedings against the party who caused the accident. In these cases, legal advice should always be sought.
Case study 3
Market value of vehicles
The background: At the time of renewal, the policyholder is responsible for establishing the market value (MV) of his vehicle. The majority of insurers would state, on their renewal notices, that market values change and a policyholder should ensure that the sum assured is revised according to current market values. The MV of a vehicle may be established in two ways:
(1) Through the value guidebook issued by the Malta Insurance Association. As the guidebook is updated yearly, it may be that some of the values may not remain realistic after some months following the date of publication.
(2) Appoint a surveyor to carry out a survey of the vehicle and, on the basis of the evaluation, the MV would be determined. It is advisable that the survey is carried out yearly to ensure that the vehicle's value is kept up to date.
Sometimes, the rule of thumb is to deduct 10 per cent of the previous year's value - but this is hardly a scientific approach.
Problems usually arise at the time of a claim and when a vehicle is considered as either "beyond economic repair" or "total loss". Sometimes, the value would not meet the expectation of the policyholder, claiming that the surveyor was not fair in his evaluation.
When claimants ask the Complaints Unit to intervene, they are advised that values are established by the market and that they have a right to see the insurer's survey report. This report would generally include the Pre-Accident Value, which is the surveyor's estimate of the market value of the vehicle prior to the accident. At times, this estimate would reflect the value reported in the value guidebook in force at the time of the claim.
Sometimes, claimants may refuse to accept the estimated value. In such cases, they are informed that the Unit does not establish values and that it would be reasonable to rely on professional valuations. If a claimant disagrees with the value of an insurer's surveyor, he may appoint an independent surveyor himself for a second opinion.
When the claimant refuses to accept the estimate produced by the insurer, the Unit would recommend that the claimant seek legal advice.
The issue of motor vehicle valuations will continue to trouble some policyholders until clear information is made easily accessible to them. For example, many policyholders are probably not aware that motor values are revised yearly. Some policyholders continue to insure their vehicles on values going back a year or two or even more, hoping that in the event of a claim, the amount for which a vehicle is insured would be taken into consideration (when in fact reality proves otherwise).
It is therefore very important for the motor value guidebook to be made easily accessible to policyholders, such as online. This facility, coupled with other initiatives to inform the consumer, would perhaps bridge the expectations gap between claimants and insurers on this aspect.
With regards to vehicles deemed to be beyond economic repair, an insurer will determine whether to repair a vehicle or not on the basis of the costs required to put the vehicle in the same condition it was in prior to the accident. This means that if repair costs exceed a certain threshold - usually 60 per cent of the vehicle's market value - it would render the vehicle "beyond economic repair". The insurer will inform the claimant about this and will make an offer either as a cash settlement for the market value of the vehicle, or alternatively, the insurer will obtain a realistic and valid value for the wreck and will pay the difference in cash.
This is market practice; whether it is fair or not remains to be seen because on the basis of the principle of indemnity, one should be able to purchase a vehicle very similar to what the complainant had with the amount of money that an insurer offers. Technically, this may not be possible for obvious reasons but that is why it is important for a fair market value to be established.
It is therefore important that, at the time of their policy renewal, policyholders should establish the market value to the best of their knowledge. It is incumbent on insurers not only to remind policyholders that responsibility to establish market values rests squarely on them but also that information which they provide to the policyholder is given in good faith. A policyholder whose insurance is renewed 10 months after the date of publication of the guidebook should be informed that the value might have changed in the meantime. It is not fair for a policyholder to renew a policy on values without being told that they are 10 months old.
Case study 1
Complaints relating to delays in opening a claim by the party who allegedly caused the accident.
The background: Mr B was involved in a car collision with Mr A. Mr B explains that Mr A emerged from a stop sign. The wardens were contacted and subsequently drew up a report. Mr B is insured on a third party basis. He contacts his insurance company and is informed that he has to open a claim with Mr A's insurer. Mr B duly does so and is informed that Mr A had not yet contacted them about the accident. They promise to contact Mr A to "persuade" him to lodge a claim. Mr B is not happy with the situation. Given the extensive damages, the car was towed to a garage. He is lamenting the fact that the longer Mr A delays in filing a claim, the greater is the inconvenience he is enduring through loss of use of his vehicle.
Mr A's insurers confirm receipt of a copy of the warden's report and send their surveyor, on a without prejudice basis (i.e. without admittance of liability), to survey Mr B's vehicle. Mr A's insurers confirm that, on the basis of the warden's report, their client is to blame but unless their client files a claim and pays the excess (Lm100), they would not be in a position to accept liability and proceed with repairs. Moreover, should they accept liability, a replacement vehicle would be provided for the period the vehicle is being repaired and not when the vehicle is at a standstill waiting for parts to be sourced or, worse still, until Mr A decides to open a claim.
The redress: Mr B would be informed that in terms of law any insured party who has been involved in an accident and who might have suffered or caused any damage or injury should inform his insurer of the accident within two weeks of the event. Whenever an insurer believes there are reasonable grounds that he may have to pay a claim to an injured party but their insured fails or delays to open a claim, the insurer is obliged to treat that event as if a claim had been made.
In many instances, drivers like Mr A would lodge a claim with their insurer and would admit fault. In other instances, Mr A would lodge a claim but refuse to admit liability. In such situations, the insurer would advise Mr A that from the documentation at hand, it is likely that he was at fault. Mr A may accept or refuse the recommendation. If he disagrees with his insurer, he has to submit a reasoned opinion in writing and within a specific time frame (within 10 days of receipt of an insurer's written notice) as to why he is not accepting liability.
Failure to submit a reasoned opinion as to his refusal of liability normally leads the insurer to automatically honour the claim and proceed with repairing Mr B's car. However, in certain circumstances, the insurer will inform Mr B that Mr A is contesting payment of the claim. The matter will probably be referred to arbitration or any other appropriate tribunal.
Mr B will always be informed that the Consumer Complaints Unit is not an adjudicating body and that it will not be involved where liability has not been ascertained. Such cases fall within the remit of arbitration and Mr A would be recommended to seek legal advice (reference should be made to the legal provisions of the Motor Vehicles Insurance [Third Party Risks] Ordinance).
Case study 2
Do I have a right for a rented vehicle period when my car is out of action?
The background: Mrs C has been involved in a car collision with Mr D.
Mr D's insurer has accepted liability and starts the process for repairing Mrs C's car (which was towed to a repairer). It so happens that some parts are not readily available. Mrs C is furious because she depends on her car to go to work and for routine family chores. Mrs C contacts the Complaints Unit to learn about her rights.
The redress: This is always a much-contested issue. Insurers would normally inform third parties, such as Mrs C, that they would only provide a rented car during the period when the vehicle is being repaired (and not when it is actually out of action).
Almost invariably spare parts would be available and repairs would commence. On the other hand, if replacement parts were not available, the insurer that accepted liability would not extend the use of a car for the period in which the injured party is waiting for the parts to arrive. Indeed, sometimes it takes longer to source parts than to repair a vehicle. The injured party will find this objectionable as the more his vehicle is delayed, the more inconvenience he suffers. Claimants expect the insurance company to remedy their situation without delay - a fair and reasonable expectation, one would argue.
The unit's approach has always been to refer to case law and there are a number of cases in which the courts (including the Small Claims Tribunal) had concluded that an injured party should be reinstated in full and a victim has a right to recover the losses and to restore his property to its pristine original state from the guilty party.
A typical case to which reference is made is Percius Car Hire Ltd vs R. Schembri (October 20, 2003, Case 616/2001/1), wherein the Court of Appeal stated that a victim should (a) minimise his losses and (b) should not be saddled with additional burdens to reduce expenses. The victim has a right to recover the cost of a hired car for the period his car is out of action. Similarly, cases Anthony and Manuel Xuereb vs Noel Caruana (June 30, 2004, Case 655/2001/1) and Mario Psaila Savona vs Chris Zahra (March 17, 2006, Case 391/2005) confirmed the abovementioned principles.
The unit always informs injured parties that it is most important to keep the insurance company (or companies) informed at all times in writing of any issues arising from a claim (such as loss of use) and as to any efforts to source parts from any supplier. The Unit also recommends that the injured party should request the insurer (in writing) to confirm the maximum amount reimbursable for renting a vehicle per day, against receipt. The Unit would also explain that the rights of an injured party are not limitless. In this sense, an injured party cannot blame an insurance company for any delays if repairs are delayed for no valid reason.
A word of caution: The Consumer Complaints Unit treads very carefully when the case appears to be more complicated than the one outlined above. Reimbursement for loss of use is not an automatic right but depends on various factors including whether liability is confirmed, and when. An injured party can always claim reimbursement for loss of use by instituting proceedings against the party who caused the accident. In these cases, legal advice should always be sought.
Case study 3
Market value of vehicles
The background: At the time of renewal, the policyholder is responsible for establishing the market value (MV) of his vehicle. The majority of insurers would state, on their renewal notices, that market values change and a policyholder should ensure that the sum assured is revised according to current market values. The MV of a vehicle may be established in two ways:
(1) Through the value guidebook issued by the Malta Insurance Association. As the guidebook is updated yearly, it may be that some of the values may not remain realistic after some months following the date of publication.
(2) Appoint a surveyor to carry out a survey of the vehicle and, on the basis of the evaluation, the MV would be determined. It is advisable that the survey is carried out yearly to ensure that the vehicle's value is kept up to date.
Sometimes, the rule of thumb is to deduct 10 per cent of the previous year's value - but this is hardly a scientific approach.
Problems usually arise at the time of a claim and when a vehicle is considered as either "beyond economic repair" or "total loss". Sometimes, the value would not meet the expectation of the policyholder, claiming that the surveyor was not fair in his evaluation.
When claimants ask the Complaints Unit to intervene, they are advised that values are established by the market and that they have a right to see the insurer's survey report. This report would generally include the Pre-Accident Value, which is the surveyor's estimate of the market value of the vehicle prior to the accident. At times, this estimate would reflect the value reported in the value guidebook in force at the time of the claim.
Sometimes, claimants may refuse to accept the estimated value. In such cases, they are informed that the Unit does not establish values and that it would be reasonable to rely on professional valuations. If a claimant disagrees with the value of an insurer's surveyor, he may appoint an independent surveyor himself for a second opinion.
When the claimant refuses to accept the estimate produced by the insurer, the Unit would recommend that the claimant seek legal advice.
The issue of motor vehicle valuations will continue to trouble some policyholders until clear information is made easily accessible to them. For example, many policyholders are probably not aware that motor values are revised yearly. Some policyholders continue to insure their vehicles on values going back a year or two or even more, hoping that in the event of a claim, the amount for which a vehicle is insured would be taken into consideration (when in fact reality proves otherwise).
It is therefore very important for the motor value guidebook to be made easily accessible to policyholders, such as online. This facility, coupled with other initiatives to inform the consumer, would perhaps bridge the expectations gap between claimants and insurers on this aspect.
With regards to vehicles deemed to be beyond economic repair, an insurer will determine whether to repair a vehicle or not on the basis of the costs required to put the vehicle in the same condition it was in prior to the accident. This means that if repair costs exceed a certain threshold - usually 60 per cent of the vehicle's market value - it would render the vehicle "beyond economic repair". The insurer will inform the claimant about this and will make an offer either as a cash settlement for the market value of the vehicle, or alternatively, the insurer will obtain a realistic and valid value for the wreck and will pay the difference in cash.
This is market practice; whether it is fair or not remains to be seen because on the basis of the principle of indemnity, one should be able to purchase a vehicle very similar to what the complainant had with the amount of money that an insurer offers. Technically, this may not be possible for obvious reasons but that is why it is important for a fair market value to be established.
It is therefore important that, at the time of their policy renewal, policyholders should establish the market value to the best of their knowledge. It is incumbent on insurers not only to remind policyholders that responsibility to establish market values rests squarely on them but also that information which they provide to the policyholder is given in good faith. A policyholder whose insurance is renewed 10 months after the date of publication of the guidebook should be informed that the value might have changed in the meantime. It is not fair for a policyholder to renew a policy on values without being told that they are 10 months old.