It’s worth checking your vehicle insurance policy

14 August 2019

Last year, the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) received over 1,000 complaint enquiries and 46 complaints about vehicle insurance.

“The best time to think about insurance is before you need it,” says Insurance & Financial Services Ombudsman, Karen Stevens. “It’s really important to check your policy and understand what you are, and are not, covered for.”

“We hear from many disappointed people who are dealing with a damaged car and a declined claim,” says Karen. “We also hear from people who are surprised to discover, for example, that the market value of their car is substantially less than they’d thought, or they’ve had to pay an excess when they weren’t at fault in an accident, or they have absolutely no cover because of a breach of licence.”

“A fairly common complaint occurs when parents of teenagers discover they have no insurance cover for their damaged car, because the teenage driver was in breach of their learner or restricted licence conditions when the accident occurred. In these cases, parents can end up paying for damage not only to their own car but to another car or property.”

“These are some of the issues we see regularly at the IFSO Scheme. We’d say to all vehicle owners check your policy and contact your insurer if you have a question or want something changed,” says Karen. “Of course, the most important thing is to always be careful on the road.”

Vehicle insurance tips from the IFSO Scheme.

1. Check your vehicle insurance policy
Vehicle insurance policies can be third party; third party fire and theft; or comprehensive. All have different levels of cover. Check your policy, including the limitations and exclusions. Note, in most cases you will have to pay an excess when your claim is accepted, regardless of who was at fault.

Case study 00209471: Paying an excess when it’s not your fault
Diane’s* car was stolen and later found damaged. Diane made a claim and asked the insurer to refund the policy excess, as she had not been at fault. She understood the insurer would be able to seek payment from the offender, who had been charged by police.
Diane’s policy specified that an excess was payable except in limited circumstances, which involved an “accident with another vehicle”. As the damage was caused when Diane’s car was stolen, rather than damaged in an accident, she had to pay the excess.

2. Check the amount you are insuring your vehicle for
Comprehensive policies fall into two broad categories: agreed and market value. Discuss the type of cover you have and the amount you are insuring your vehicle for with your insurer. If you disagree with the amount, consider getting an independent valuation.

Case study 00209788: Car written off, pay-out less than expected
Kelly’s* car was damaged in an accident. The insurer assessed repairs at $16,374.85. The pre-accident market value of the car was $6,500, which the insurer then increased to $7,500 to take into account the new alloy wheels. Kelly believed the claim should be settled for the $10,500 sum insured (as specified in her policy schedule), not the $7,500 market value. The policy said the maximum the insurer would pay was the lesser of the sum insured or the market value. In this case, the market value of $7,500 was less than the $10,500 sum insured.

3. Check your car, warrant, tyres
Make sure your car has a warrant and regularly check the general safety and roadworthiness of your car, including the tyres. Claims can be declined after an accident if the car is considered to be unsafe or unroadworthy, even if it had a warrant.

Case study 112531: No tyre tread, no cover
In March 2007, Charles* insured his Subaru Legacy. In May, he lost control in wet weather and crashed it. He made a claim, and his insurer’s assessor confirmed the car was a total loss. After the accident, the police issued Charles with infringement offence notices, which included reference to “operating a vehicle with a smooth tyre”. Reports from the police, the assessor and the tyre specialist confirmed one of the tyres had barely any tread. Having a warrant, which the vehicle did have, doesn’t automatically make a car warrantable at the time of the accident. The vehicle’s owner is responsible for ensuring it is safe and roadworthy. Charles’s claim was declined due to a policy exclusion which says there is no cover if an accident occurs when the car is not in a safe or roadworthy condition. Charles argued he didn’t know about the tyre, and it didn’t cause the accident. However, there was enough evidence to show he did know, or should have known, about the smooth tyre and it contributed to losing control of the car in wet weather.

4. Tell all and tell the truth
When you apply for insurance, renew your policy, or make a claim, answer all questions accurately and truthfully. Tell your insurer about any vehicle modifications - for example, new sound system, mag wheels, or larger engines. Many claims are declined, and policies cancelled, because of non-disclosure, or because of incorrect or false statements. This can affect the availability of future insurance.

Case study 13114: A car bumped into me, no it didn’t.
Mr and Mrs Jones* held third party liability insurance and Mr Jones made a claim after his car was damaged, as he said another car hit him from behind. His insurer told Mr Jones that, as he only held third party insurance cover, any repairs would have to be paid by the other driver’s insurer. Roger*, the other driver, told his insurer he was involved in the accident, but he didn’t hit Mr Jones from behind; rather, Mr Jones came to an abrupt halt at an orange light causing Roger to drive into the rear of the car. A claim was lodged with Roger’s insurer for liability only. When Roger’s insurer appointed an investigator to make enquiries, Mr Jones asked for the claim to be withdrawn, but it wasn’t his claim to withdraw. Mr Jones contacted the insurer and admitted to telling a “bit of a lie” in the original claim. But it was too late. The insurer cancelled the policy and a red alert was placed on the Insurance Claims Register (ICR) against both Mr and Mrs Jones, as they were joint policyholders.

5. Drive carefully and safely and comply with licence conditions
You won’t have cover if you are driving in breach of your licence when an accident occurs. Take note of your licence conditions and stick to them. Drive carefully, don’t speed and be aware of alcohol limits.

Case study 130105: Teenage son flips parents’ car, restricted licence, no cover
Simon*, who was on a restricted licence, crashed his parents’ car. He got distracted by a noise coming from the gear box, the front wheel caught the side of the road and the car flipped on its side. Simon’s sister Denise*, who also had a restricted licence, was in the passenger seat. The claim was declined because, at the time of the accident, Simon was driving outside the conditions of his restricted driver’s licence. Simon’s parents argued the exclusion shouldn’t apply, because the breach didn’t cause or contribute to the accident. But there was no evidence to contradict the conclusion that a suitably qualified driver in the car could have helped prevent the accident.

Case Study 114343: Excess blood alcohol, excluded from cover
After attending a function and drinking some beer and a bourbon and coke, Tim* had an accident, injuring himself and damaging his car. ​
Tim’s wife’s claim for damage to the car was declined, because Tim was over the legal blood alcohol limit, which was specifically excluded by the policy. ​Tim argued the road conditions and visibility were poor and he was not driving in excess of the speed limit. However, the ESR report said Tim’s blood alcohol level more likely than not had impaired his driving ability. Tim had not proven, on the balance of probabilities, that his blood alcohol level did not cause or contribute to the accident.​

*Not real names