Insurance Helpline | Who gets the auto repair claims cheque?
QUESTION: If an insurer decides to pay a garage to repair a vehicle, does the policyholder have the option of asking for a cheque to cover the repair costs to be paid directly to him instead of the insurer making payment to the repairer? Also, in the event that the vehicle is declared a total loss, is the claimant obligated to retain the salvage?
INSURANCE HELPLINE: Your questions suggest that you, like most persons, have not read your motor-insurance policy. Or, having read it, you did not understand it and/or had difficulty in applying what you read to your claim.
It is also probable that your service provider - an agent, broker or insurer - did not clearly explain the claims settlement options that your policy offers.
Whatever the reason, the end result is the same. You have found yourself in a less-than-ideal situation after an accident in which your vehicle was damaged. You need information to make a decision.
Insurance should create certainty. However, uncertainty is, too often, a feature of our market. Contract certainty, a set of ideas intended to provide clarity for both customer and insurer about the terms and conditions of a contract before it begins, is largely absent from local insurance practice.
The process diagram on this page shows the stages in the settlement of a property damage claim for a motor policy. Can your insurer omit Stages 5 to 7 and pay the agreed repair costs to you instead of to the garage?
The answer to your first question is yes. The contract that I looked at puts it this way: "At our option, we (the insurer) may either: pay for your vehicle to be repaired; or pay an amount in cash equivalent to any loss of or damage to your vehicle."
The payment, as indicated in Stage 7 of the diagram would be less the policy excess, or deductible.
The contract also answers your second question - indirectly. It refers to the insured vehicle as "your vehicle". Payment of a claim does not confer any rights of ownership to the insurance company. In the event of a claim for a vehicle which is declared a total loss or a constructive total loss, the insurer usually has the absolute right to decide how the salvage will be disposed of.
In some cases it will decide to ask the owner (policyholder) to transfer the rights of ownership on payment of the claim. In other instances, it may refuse to do so. Each case is treated on its merits.
I hope that this article with the accompanying diagram have addressed the two questions that you raised and has clarified the matter for other readers who may have similar problems.
... Back to the FSC
I see from a letter to the editor, published on October 4, that I owe an apology to the Financial Services Commission and its Executive Director Janice Holness. The sin that I committed was not to have read Ms Holness' response to the two-part article that I wrote some 10 months ago: 'Are insurance customers treated fairly?'.
Because I did not see the response, I wrote in another article about a deafening silence from the FSC. Ms Holness: please accept my heartfelt and humble apology. Many thanks for the response.
I have been a persistent critic of the FSC's Market Conduct Guidelines on Best Practice for Motor Insurance Claims (IR-GUID-09/08-0014) for many years. Ms Holness' response to my two-part article led me to the commission's website and a June 30, 2014 document entitled "Guidelines on Market Conduct for Insurance Companies and Intermediaries".
The new guidelines revise some of the old rules. I propose to examine the new rules in future articles in the context of actual customer experiences and the comments in relation to local claims practices by the authors of the Inter-American Development Bank/Access to Insurance Initiative August 2014 study. FSC communication and international relations manager, Keron Morris should do the same. Reading and writing are two skills that improve with continuous practice.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: firstname.lastname@example.org