Posts Tagged ‘car insurance claim’

The legendary Henry Ford was quoted as saying that “Customers can choose any colour of car …as long as it is Black!”

Many car owners pay little attention to the relationship between car insurance and the colour of the car they wish to purchase. Should they pay more attention and does the colour reduce or increase the car insurance premium?

It is rather interesting to note that car insurers in South Africa and the US differ in the importance they place on the colour of the vehicles insured…

Car Colour and Car Insurance in the US

I have searched the internet to find some clarification from car insurers and have found that this question has been included as one of the topics under the “Myths of car insurance”.

A US survey has revealed that many vehicle owners believe that colour might be a factor in determining car insurance rates – and that a red car would cost more to insure. Insurance companies have however denied this – and I would like to quote the response from one insurer:
“The idea that the colour of a car enters into what you’re going to pay for insurance is a myth that’s been around for a long time,” says Jeff McCollum, a spokesman for State Farm Insurance. “I wouldn’t be surprised if it came from the fact that people with red sports cars have the image of being wild and reckless, but it certainly isn’t based on any type of reality.”

What are the most important characteristics of your car to be considered?

The car insurance companies will pay attention to:

• The year and age of your car
• The make of car
• The model of your car
• The body type and accessories
• The engine size of your car

There are also other much more important vehicle features to consider such as safety features, air bags etc…

We can however not merely dismiss the importance of the colour of a car as a “myth”. There are indeed interesting relationships between the colour of vehicles and the owners of those vehicles. The Canadian Automobile Association looked at the psychology behind the process of choosing the colour of a car and, according to their analysis, the red colour supposedly signifies you have an enormous “need for speed”.

Many psychological experts say that the colour red reflects people who are reckless in nature. Red also represents fearless, highly active people who love taking risks. The car insurance truth is that it makes no difference in your insurance coverage whether or not your car is red or any other colour. If your red car happens to be a Ferrari, Lamborghini, Porsche, or any other high-speed car that is expensive, your higher premium will be based on the other characteristics of the car rather than the colour!

Importance of Colour in South Africa

South Africa is often referred to as the Rainbow nation – not for the colour of the cars available – but rather for the rich diversity in culture, language and even nature!

It appears that Car insurers in South Africa regard the colour of the insured vehicle as more important than the insurers in the US. There is a definite higher car insurance premium payable in South Africa for cars with a darker colour and cars with metallic paint.

Practical considerations considered include the following:

• Which colour of car is involved in accidents the most and provides the most accident claims?
• Which colour is the most expensive in the repair process?

Actuaries from car insurers in South Africa believe that the colour of your vehicle does have an effect on your car insurance premium. Statistics show that a darker colour car is more likely to be in an accident due to the fact that it is harder to see. A white or silver car is more visible.

Another factor of how the colour of your car can affect the premium is the cost of repairing the vehicle. Flat non metallic colours are easier to match, with white regarded as the easiest. Metallic colours are sometimes difficult to acquire and difficult to match. One of the more expensive Mercedes-Benz models on the market has the paint described as “designo magno platinum” and has “a highly scratch and dirt-resistant matt finish”. This is available in metallic black, silver, grey and red – and will be more expensive to repair that your ordinary vehicle colours.

Next time a shining and flashy car is passing you – know that the owner is paying a bit more to have that beautiful paint on the car kept on the road!

We have given much attention on the car insurance blog to finding cheaper car insurance and identifying the best car insurance company. We have focused on the need to be careful when reading the policy document and to note the fine print.

We would however also like to focus on a small but important part of the process of gaining car insurance – the disclosures made by the insured client on the policy application!

Neglecting to make a full disclosure in your policy documents may lead to an invalid claim – and will allow the insurer to decline your claim. This is very important to understand – so let us explain this in more detail:

• A car insurer calculates the premium based on all the information that the client has provided.
• This information will reveal the risks or likelihood of vehicle damage or vehicle loss.
• Much of this information is only known by the client – such as previous accidents and claims or convictions for drunk driving etc
• Only the client is aware who the nominated drivers or regular drivers will be, whether the vehicle is to be used for private or business purposes etc.
• By not providing ALL this information – and the CORRECT information – you will be guilty of defrauding the insurer and placing the insurer in an unfair, perilous position!

It is important to understand that this is not a “back door” for the insurer to dismiss an insurance claim – but rather as recognition of a fundamental principle of insurance! It is only fair that the rights of the insurer and the legitimate expectation of full disclosure are respected as well.

What is the measurement of how much is to be disclosed?

Insurers are entitled to full and frank disclosure of all facts material to its assessment of the risk and the premium charged. The Ombudsman for Short-Term Insurance, Brian Martin says if you are unsure of your facts, rather ask for more time from your insurer to verify the facts or advise them that you are unsure.

Car insurance clients will ask themselves “Do I need to inform the insurer about this?” We would like to advise that the client rather attempts to place himself in the position of a fictitious judge and ask – Would an independent judge regard that the insurer should have known about this when calculating the premium?”

When does the client have to make this full disclosure?

It is important to recognize that this is not a once-off disclosure or the purchase of a once –off asset! The agreement is based on continuous cover for an asset that needs to be protected from ever changing threats. If those threats are significantly altered – the car insurer needs to be made aware of this!

Consumers need to ensure that they advise their insurer or broker if circumstances have changed since the inception of the policy, for example, there is a new regular or nominated driver, the purpose of use has changed or you have had a change of address.

Decisions by the Ombudsman for Short Term Insurance

It is perhaps best to also to focus on the decisions of the Ombud pertaining to disclosures! How will the Ombud adjudicate disputes about the correctness of information disclosed?

An insurer relies upon the information furnished and bases its assessment on the truth and accuracy of that information. “If you have had prior claims or a judgement against you, make sure that you disclose this information. Rather adopt the policy of providing too much information then too little information”, says the Ombudsman for Short Term Insurance.

Example of partial disclosure made to a car insurer

The Office of the Ombudsman for Short Term Insurer dealt with a complaint where the insured had telephoned an insurance company enquiring about insurance cover for his vehicle and contents of his house. Based upon the responses given to a number of questions, the insurer provided a quotation which was accepted by the insured.

A few months later the insured filed a claim for damage to his motor vehicle which had been involved in an accident in a parking garage. The insurer rejected liability for the insured’s claim on the grounds of non-disclosure. The insured had submitted four accident claims against his previous insurer within a short period of time and which were of significant value. At the time that the insured took out the cover, he was asked whether in the previous five years there had been claims made against his vehicle, to which he only acknowledged one claim. Had the insured provided proper disclosure to his insurer, they would have declined the risk due to his history of claims.

The Ombud commented as follows:

“In this instance, we agreed with the insurer’s decision that they would declare the policy void from inception, but that they needed to refund all the insurance premiums that had been paid by the insured.

The insured knew that he had filed a significant number of claims within a short period of time against his previous insurer and that this information would certainly have affected the insurers assessment of the risk.”

We have previously raised this topic in 2 separate Blog posts titled:

• Who is the Ombudsman and can he help with my car insurance?
• How do I complain about my car insurance claim?

I have found the process to be very effective and have personally experienced the favourable outcome of such a complaint to the Ombudsman. We have also found that it is worthwhile to take some time to find and follow the correct steps to follow in this process.

Many visitors to the Car Insurance Blog have searched for information on the procedures to follow when raising a complaint – and we would like to provide more clarity.

The Ombudsman provides a handy guide on the steps that every complainant should follow.

Before you raise a car insurance complaint

You must complain to the Insurance Company first, before we can look at your complaint. Remember that the Insurance Company must first respond on you claim before you can take this matter to the Ombudsman.

Attitude, Facts, Documentation and Records

Once you have submitted a car insurance claim, the car insurer could accept the claim and make payment, reject your claim or decide to make partial payment under the claim. It is at this stage where many consumers may become unhappy, agitated and seek further action.

Your attitude is most important and we would like to suggest keeping the following in mind:

• Remain calm and give the insurer the benefit of doubt.
• Accept that there is no intentional malice on the side of the insurer and person who has responded.
• Accept that someone could have erred in having overlooked something in your claim.
• There could be many reasons why the answer received does not meet your expectations.
• It is important to focus on the facts – the law will look after itself!
• Focus on collecting and gathering all the documentation needed for your complaint as well as all your communications with your insurer, your broker and parties to this claims process.

Complaining to the Car Insurance Company:

Here are some hints to help you complain effectively to the Insurer and details of what to do next if you are still unhappy with their decision.

1. It is usually best to complain in writing. But if you phone, ask for the name of the person you speak to. Keep a note of this information, with details such as, the date and time of your call and what was said. This may be required at a later stage.
2. Remain calm and polite, however emotional, angry or upset you may be. You are more likely to explain your complaint clearly and effectively if you can stay calm.
3. Initially attempt contacting the person you originally dealt with. If they cannot help, indicate that the matter will be taken further. Seek details of the name or job title of the person who will be handling your complaint and for details of the Insurer’s complaints procedure.
4. Make an attempt to take up the matter with a Senior Official at the Insurer.
5. When you write a letter of complaint, set out the facts as clearly as possible.
6. Write down the facts in a logical order and stick to what is relevant. Include important details like your claim number or your policy number.
7. Keep a copy of all letters between you and the Insurer.

What to do after complaining to the Car Insurance Company:

If you are not happy with the Insurer’s decision you may:

1. Issue a summons out of the Small Claims Court ( there is a small cost involved ) on the Insurance Company. The maximum amount that can be claimed in the Small Claims Court is R 7,000.00.
2. Consult with an Attorney to pursue the matter by means of further legal action.
3. Submit a complaint to the Ombudsman of Short Term Isurance.

There are 2 Options available for submitting a complaint to the Ombudsman

You can either complete the complaint form by hand and post or fax it or complete the complaint form online and post or fax it. Visit the website of the Ombudsman for Short Term Insurance for more information.