‘On your own, solve the smaller problems and leave the bigger ones for ‘God’ to solve’
The upward adjustment in motor insurance tariffs which triggered a lot of discussions, especially among persons who felt aggrieved in the past due to a few previous experiences has also brought out some sticky technicalities that need to be addressed for better understanding.
Readers will recall the write-up on that university professor friend of mine who called me some time last year to express her displeasure at the treatment from her insurers.
This was after she had crashed her car into a tree stump denting the fender. She expected her comprehensive policy to cater for the entire damage. The cost of repairs and re-spraying was GH¢800, but this was not to be, as her insurers, while willing to settle the claim also advised her to rather bear the responsibility in order to enjoy her accrued No Claim Discount (NCD) of GH¢900, at the policy’s renewal. While this may sound a bit frustrating, it is professionally appropriate.
As I explained to my friend, in this case, the cost of repairs and re-spraying is less than the NCD value she will earn at renewal. It will, therefore, be disadvantageous to her if her insurer were to bear the cost of repairs. On the other hand, if she bore the responsibility of fixing the problem, she would have NCD above the cost of repairs, which could buy excess on the policy to free her from having to contribute towards any future claim. Notwithstanding my clarification, my friend still requested to convert her comprehensive policy to third party, with limited cover at a lower premium.
Is she justified?
Yes! She has a case and deservedly so because the damage has indeed occurred and she deserved to be paid her claim. However, if the claim was paid, she would lose the NCD of 50 per cent amounting to GH¢900 and also pay a higher premium upon renewal. Moreover, she will suffer a 10 per cent excess claim deduction and reinstatement premium from the claim in certain scenarios, which will eventually reduce the claim amount. In this circumstance, therefore, she has the right to request the claim or take personal responsibility.
Excess cover in motor insurance
The basic comprehensive motor insurance policy comes with excess, which allows the owner to also suffer some minimum cost, usually between 10 per cent and 15 per cent in repairing the vehicle if an accident occurs. It is a contribution one is required to pay towards a claim if s/he makes a claim on his / her car insurance policy, especially if s/he is the one blameable for the accident. An insurer may have many types of excesses that can apply in different situations or apply concurrently.
Choose an excess that reduces your car insurance premium
Often and naturally so, most clients will want to pay lower premiums, in which case, insurers can allow them to increase their excess to reduce their premiums. This is one of the most effective ways to save on one’s car insurance costs. However, this also means that when one does make a claim, s/he may have to pay more towards replacement or repair. It’s easy to be carried away by the potential savings with the hope that one will never have to make a claim. But one may not want to be left out of pocket when something does go wrong. This makes it important to only select a level of excess one can afford.
Meanwhile, one’s insurer can reduce the premium (within the acceptable rating standard) when s/he increases his / her excess because this shifts some risk from the insurer back to the insured. Essentially, when one’s excess is increased, it saves insurers from having to pay out numerous small claims.
What are the different types of excess?
There are several types of excess one can subscribe to and these are often listed on the certificate of insurance. However, not every policy has the same type of excess as they don’t apply in the same situations. Insureds should make it a point to refer to the certificate of insurance for more details on excesses.
• Accident damage / parts excess
This applies to the damaged portion and the cost of parts involved.
• Standard/Applicable excess
This is the amount one agrees to contribute towards the making of all claims. It is a stand-alone arrangement or may apply by itself or with another type of excess.
• Under Age/Inexperienced driver excess:
This applies if the driver is under the age of 18, but has held a drivers’ licence for less than 24 months. This, however, does not apply in the Ghanaian context.
• Special/Additional Excess:
Sometimes an insurer may have an excess payable upon special circumstances or due to vehicle reasons that are additional to the standard excess.
When not to buy an excess
Most insurers waive the excess if the insured were not at fault and can provide the name and information about the other person who was. In this regard, his / her insurer will redeem the costs from the person who was at fault. This also means that, if the fault cannot be attributable to anyone, the excess cannot be waived. For instance, if one’s car was damaged in a flood while it was parked, then, s/he will still be required to pay a basic excess. Of course one can add extra coverage to his / her policy so that s/he would not have to pay any type of excess for certain claims.
The way forward
The insurance spectrum is a highly technical one, as such, regular stakeholder education is imperative, particularly, on policy details in order to manage fallouts from dishonoured claims. For instance, in the context of Ghana, crisp and exciting documentaries and brochures on specific policy details and claim processing, translated in various local languages, could be used as promotion materials to help in public education. Invariably, this will help a great deal in reducing the negative perceptions some members of the insuring public have about motor insurance in particular and other lines of insurance in general. — GB