The model matters - Flashy cars equal high-risk insurance
Cedric Stephens, Contributor
QUESTION: I am buying a car for my 19-year-old daughter who recently began her tertiary education. What type of vehicle should I buy? Also, in order to save premium, I am planning to insure the vehicle in my name even though my daughter will be the main driver. Is this a wise thing to do?
- W.B., Kingston 8
INSURANCE HELPLINE: The associate in the customer service division of my insurer referred me to a car dealer when I posed your first question to her. She misunderstood the context. I persisted.
When she learnt that I was seeking information about which vehicles were less problematic, safer and more economical to insure for a young driver, the penny finally dropped. She sent me a copy of her motor referral list (MRL).
The listing contains data about vehicles in her company's high-risk group. If the vehicle that you buy does not appear there, things are okay.
Forty-one vehicles were on the list. In addition, it also referred to "all sports cars, convertibles, high performance and turbo(charged) vehicles".
These can fall into one of three groups: vehicles that the company does not wish to insure; vehicles that the company may insure, depending on the particular circumstances; and vehicles that are very costly to insure, as compared to standard passenger vehicles.
Managers control the group assignment process.
If you do not buy any of the vehicles listed on my insurer's MRL for your daughter, chances are that you will end up not paying extra premium.
On the other hand, if you were to buy a vehicle that was on the MRL, the cost would be much higher. Vehicles on that list include: Mitsubishi Evolution, Mitsubishi Lancer GSR Turbo, Subaru Impreza WRX, Subaru Impreza STI, Toyota Starlet GT Turbo, Acura RSX, Honda Integra Type R, Volkswagen Golf GTI, and Honda Integra - Type RSX.
Note also that even though there may be similarities between the vehicles that are listed on each insurer's MLR, no two MLRs are the alike.
What is a high-performance vehicle? The MLR does not say.
My favourite Internet search engine provided a definition.
Engine size, engine speed, handling, and safety ratings are some of the things that insurers consider in deciding whether a particular vehicle is high performance or a standard passenger vehicle, according to Auto Insurance.Org.
As a rule, HPVs perform "significantly better on the open roads" than a standard passenger vehicle. The former are especially "built for speed and handling". Insurers assume that it is "highly unlikely that the average driver who purchases one of these cars would routinely conduct himself on public roadways in the same safe manner" he would if he were driving a standard passenger vehicle (SPV).
I drove a new German-made, turbocharged vehicle from Kingston to Mandeville recently. The journey was completed in record time.
The speed, power and the handling of the vehicle - especially around the bends on the road leading from outside of Porus to the Mandeville round-about - provided a thrill that would be impossible to replicate in my old, four-cylinder Japanese SPV!
Some persons believe that it is okay to withhold information from their insurance company in order to pay a lower premium. They are wrong.
Failure to disclose accurate information, either unintentionally or deliberately, gives an insurer the right to avoid paying a claim.
"An insurance contract," according to the United Kingdom's financial ombudsman, "is a contract of utmost good faith."
This means that all parties to the contract are under a strict duty to deal fully and frankly with each other. Customers must disclose all facts that are 'material' - or relevant - to the risk for which they are seeking cover.
"A 'material' fact is one which would influence an underwriter when they were deciding whether to accept the risk, and the terms and conditions that should apply. If a customer fails to disclose (or misrepresents) a material fact and this induces the insurer to accept the proposed risk, the legal remedy for the insurers is to avoid the policy. This means the insurer treats the policy as though it never existed. Unless fraud is involved, the insurer will normally return the premium and will not pay out on any claim made under the policy."
Would Jamaican courts apply these principles in their rulings? I strongly believe so.
Information about who the main driver is would be considered a material fact. When I looked at your insurer's application form - under the section that sought information about the driver - it was very clear that the company wanted details about the main driver.
You are under a duty to supply your insurer with 'material' information about the person who would be the principal driver of the vehicle that was being proposed for insurance.
It would be unwise to conceal this information.
Finally, the US Insurance Institute for Highway Safety issued a report in July recommending used vehicles for teens after its research found that many are not driving the safest ones.
Safety and affordability - in that order - are the most important considerations, it said.
I suggest that you look at the list of vehicles that IIHS recommends.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: email@example.com