Sunday, November 6, 2016

Motor Insurance - The BETTERMENT Factor

WE refer to the letters “Baffled by insurance coverage rule” (The Star, Aug 20), “It pays to understand insurance” (The Star, Aug 25), “Make changes to benefit the consumers” (The Star, Aug 27) and “Motor insurance policy 101” (The Star, Aug 28).
Persatuan Insurans Am Malaysia (PIAM) welcomes the comments of the writers and would like to clarify some of the issues highlighted.
As rightly pointed, the basis of a claim is to put the owner in the same condition as he would have been in before the accident occurred.
Betterment will apply when in the course of repairing an accident-damaged vehicle, a new franchise part is used to replace an old part. It will be based on a scale of betterment adopted by the insurance industry.
For vehicles above five (5) years, the rate of betterment ranges from 15% to a maximum limit of 40% for vehicles of 10 years and above.
Conceptually, betterment will be taken into account if new parts are used to replace the damaged parts as the vehicle will be in a better condition after the repairs than it was before the accident.
Of course, if reconditioned parts are used, then “betterment” will not apply. If the owner does not agree to pay for his “betterment” factor, then he will have to wait for the workshop to source for reconditioned or second-hand spare parts.
Availability of spare parts depends on the market and insurance companies have no control over it, especially where the vehicle is an old or special model.
It appears that “More Than Frustrated” has been communicating with the workshop rather than with the insurance company involved and may therefore be getting incomplete information.
PIAM advises the writer to contact his insurance company directly. Alternatively he can call the Accident Assist Call Centre at 1300 22 1188 or contact PIAM at 032274 7399 or pic@piam.org.my for assistance.
PIAM would like to advise policyholders with comprehensive motor policies to submit their own damage knock-for-knock (KfK) claims to their respective insurance companies if third parties are clearly at fault. This will expedite claims processing, similar to own damage claims, as the workshops are in the insurance companies’ panel. In such cases, the policyholders’ no claim discount (NCD) entitlements will not be affected.
With regards to determining the sum insured value under a comprehensive motor policy as raised by “Overcharged Customer”, insurance companies are required to advise consumers during the pre-contractual stage or renewal of motor policies on the market value of a vehicle based on a credible motor vehicle valuation database.
This was one of the initiatives implemented by Bank Negara Malaysia in 2011 to reduce the subjectivity in determining the market value of a vehicle and enhance consumer protection.
Insurance companies are also required to educate consumers on the importance of insuring the vehicle at the appropriate market value and the effect of over-insurance and under-insurance when a claim is made.
If the market value of a vehicle at the time of loss is higher than the sum insured by more than 10%, the insured would need to bear a portion of the loss in proportion to the under-insurance.
On the other hand, it would be a waste of money to over-insure as the insurance company would not pay more than the market value.
Prior to the purchase or renewal of insurance, consumers may wish to obtain a free estimate of the market value of their vehicle at www.mycarinfo.com.my. This is a one-stop site that furnishes you with information about your vehicle.
Policyholders are advised to read the terms and conditions of their motor policy carefully so that they are fully aware of their insurance cover and what they can claim in the event of an accident.
Relevant consumer information on Useful Guide and Motor Accident, etc. are readily available on PIAM’s web-site www.piam.org.my.
MARK LIM
Chief Executive Officer Persatuan Insurans Am
Malaysia
http://www.ami.com.my/the-betterment-factor/
Published on AMI website in September 2015