Making a claim on car insurance
Anthony had a comprehensive car insurance policy on his brand new V8 car. Three months after getting his new car he has an accident. He believes the other side is at fault. He puts in a claim. He needs his car back on the road as soon as possible. He has been ringing BIG INSURANCE COMPANY every day but nothing has happened for weeks. His car is sitting in a repair shop. BIG INSURANCE COMPANY keeps asking for information and still won’t make a decision.
To Claim Or Not To Claim?
Before claiming you need to think about whether you should claim at all. Making a claim can affect:
1. Your ability to get insurance later
2. The cost of future premiums
3. Your no claim bonus
You may also have to pay an “excess”. The excess is the amount of money you agree to pay in the event of a claim. In the event of an accident (rather than theft), the excess payable may vary according to who was driving the vehicle at the time. Check your policy for details.
When to consider not claiming:
1. Where there is very minor damage; and
2. The cost of repairing the total damage is less, equal to or just over the amount of the excess.
Remember, the damage includes not only repairing or replacing your car, but may also include the repair or replacement of any other vehicle or property damaged in the incident, depending on who is considered to be at fault (or partially at fault).
Can I decide not to claim and take the other car owner to court?
Yes you can but this can be risky. You may not be able to recover all of your legal costs, even if you win. You may lose, and then you would be liable for your own costs as well as the other party’s costs. It is not recommended.
If you are uninsured see Fact Sheet: I’ve had a car accident and I’m uninsured!
How to make a claim
Ring the insurer and ask for a claim form.
Many insurers now process claims over the phone (If English is a second language you may be safer to claim over the counter.) Your conversation may also be recorded by the insurer.
BEFORE you ring, work out what you are going to say. It is important to keep your descriptions simple and accurate.
DO NOT ring the insurer if you are upset or still in shock. Wait till you are calm and can clearly describe what happened.
If possible, get a claim form so you have time to think about what happened so you can describe it clearly.
If the insurer tells you over the phone that you cannot claim or your claim will be rejected, this may not be right. YOU MIGHT STILL HAVE A CLAIM YOU CAN PURSUE. YOU SHOULD ASK THE INSURER TO PUT THEIR REASONS FOR REJECTION IN WRITING SO YOU CAN GET ADVICE.
ALWAYS KEEP A NOTE OF YOUR PHONE CLAIM (INCLUDING WHO YOU SPOKE TO AND WHEN, THE ACTUAL CONVERSATION AND ANY CLAIM NUMBER) OR A COPY OF YOUR CLAIM FORM.
What to do when you are in Insurance Claim Limbo
Sometimes, like Anthony in the case study, you can get stuck in limbo where you have made the claim but have not had an answer. You ring the insurer and they keep asking for more information or saying your claim is still being processed.
Insurers are required to comply with the General Insurance Code of Practice. Section 3.1 of the Code states that an insurer must decide to accept or deny your claim within 10 business days of receiving the claim. If the insurer decides it needs further information or an assessment to decide your claim, then the insurer must notify you within 10 business days of receiving the claim:
1. What further information is required;
2. If a loss assessor needs to be appointed;
3. An estimate of the time required to make a decision.
So if the insurer is not making a decision and not informing you whether further information is required or why there is a delay try sending the following letter:
Re: My motor vehicle insurance claim
I refer to the claim I made on __ / __ / __ (by telephone/in writing).
To date, I have not received a reply.
S.3.1 of the General Insurance Code of Practice requires that you respond in 10 business days.
I seek a decision on my claim, or a detailed statement of any further information required todecide the claim and an indication of the time it will take to decide.
I look forward to your urgent response in writing.
If this does not work you can send a letter of complaint to Insurance Code Compliance at:
General Insurance Division
Financial Ombudsman Service
GPO Box 3
Melbourne VIC 3001
Re: My motor vehicle insurance claim with [insurer]
I made a claim with [insurer] on __ / __ / __ (by telephone/in writing).
I have tried to follow up my claim on the following occasions [give details of the delay or your concerns].
I believe this delay is unreasonable.
S.3.1 of the General Insurance Code of Practice requires that the insurer respond to my claim within 10 days. I contend that [insurer] has breached the Code.
Please investigate the issues raised.
The above complaint should assist in getting a response. However, if this is unsuccessful you could refer the matter to the Financial Ombudsman Service. A sample letter appears below:
Financial Ombudsman Service
GPO Box 3
MELBOURNE VIC 3001
Re: My motor vehicle insurance claim with [insurer]
I have a claim dispute with [INSURANCE COMPANY] relating to my motor vehicle.
I request that the Financial Ombudsman Service (“FOS”) consider this dispute on the basis that it is an unresolved dispute between me and the [INSURANCE COMPANY]
1. I made a claim on [DATE].
2. I have been waiting on a decision from [INSURANCE COMPANY] for over [must be over 45 days] and despite calls I have not received a response. OR
3. I have given all information as requested by the [INSURANCE COMPANY] and it has been [MUST BE OVER 45 DAYS] since I provided the requested information and I still don’t have a decision from the [INSURANCE COMPANY]. OR
4. [INSURANCE COMPANY] rejected my claim on [DATE] and referred to me to its internal dispute resolution department. It has been over [MUST BE OVER 45 DAYS] and I still don’t have a final decision.
[INSURANCE COMPANY] has not acted in accordance with its dispute resolution obligations under the Code of Practice and ASIC Guideline 165.
As the dispute remains unresolved, I request that FOS investigate the dispute. I look forward to receiving a Notice of Referral to be completed by me.
Get legal advice if you are still in limbo after trying the above letters.
What if I can’t pay the excess?
The excess is the amount you have agreed to pay in the event of a claim. In a way, the insurer is asking you to contribute an amount to the costs of the claim so that you share some of the risk.
If you are in financial difficulty you may not be able to pay the excess. If this is the case, ask the insurer to take the excess out of any claim you are to be paid. It is unreasonable for an insurer to not agree to do this unless it is not practical (for example, you will not be receiving money because your car is being repaired). Then you should request to make payments by instalments to cover the excess. If the insurer won’t be reasonable – GET ADVICE.
For further information, see Sample Letter – Can’t pay my excess.
Do not drop your claim because you can’t pay the excess. The insurer cannot refuse your claim just because you cannot pay the excess up front. Remember, even if the damage to your vehicle is minimal, there may be other damage arising from the incident that you may have to pay if your claim is not approved.
What can I do if my insurance claim is refused?
If your claim has been refused, click here to read the Fact Sheet – What can I do if my car insurance claim is refused? If your claim is approved, read on.
Repair or write-off (total loss)?
It is up to the insurer to decide whether your car is so damaged that it is a write-off or whether it should be repaired. If a vehicle is deemed a statutory write-off, this means the vehicle can’t be registered again because the vehicle is so badly damaged it would be unsafe to repair it. If a vehicle is deemed a repairable write-off it means that the vehicle can be repaired but the insurer considers the cost of repairing the vehicle uneconomical to repair.
If the car is a write-off then the insurer may either:
- take the damaged car, give you money for the value of the car and give you the option of buying the car back at an auction; or
- give you the option of keeping the damaged car but only pay you the value of the car less its salvage value.
If the car is deemed a repairable write off, the insurance company may place the car on a repairable write off register. If you are keeping the car, it will then be up to you to repair the damage, remove it from the register and take all necessary steps to re-register it with your state’s roads and traffic authority.
If the car needs to be repaired, then it should be repaired by the insurer’s authorised repairer.
The General Insurance Code of Practice at s.3.13, provides that where the repairer is selected and authorised by the insurer, then the insurer is responsible for the quality of the workmanship and materials. The insurer must also handle any complaint about the timeliness of the work or conduct of the repairer as part of their complaints handling process.
So, if the repairs are faulty or incomplete then the insurer is responsible for fixing this.
Agreed value or market value?
The amount the insurer will pay you depends on whether you have insured your car for an agreed value or a market value.
Agreed value is where you and the insurer have agreed in the policy about what you will be paid if the car is a total loss. For example, if you and the insurer agree the car is worth $20,000 and then the car is a total loss, the insurer will pay you $20,000.
The agreed value will usually reduce automatically upon renewal of your policy because it is assumed that your car will depreciate (go down in value) over time. It will be difficult to dispute the agreed value (because you didn’t actually “agree”) at the time you make a claim if you have not raised this with the insurer upon receiving your renewal notice. If you think you have been treated unfairly, get advice.
The market value is what your car was worth if you sold it. It will almost always be less than the agreed value as your car loses value over time as you use it. For example, if you bought your car for $20,000 and two years later the car is a total loss, the market value may only be $15,000 or less.
It can be very difficult to work out the market value of a car.
If you dispute the market value given to your car, get evidence. For example, obtain an independent valuation, find advertisements for comparable cars, or check www.redbook.com.au
What if I only have Third Party Property Insurance?
You may claim on this type of policy if there is any damage to any other car or property. If there is damage to your vehicle, you will need to pay for the repairs yourself. If you believe that someone else caused, or partially caused the accident you may be able to recover your costs from them or their insurance company.
Uninsured Motorist Extension
Your third party property policy may entitle you to claim up to $3000 for damage to your car. The policy may include a benefit called uninsured motorist’s extension (UME). You can claim if the other driver was at fault, uninsured and you can identify the driver of that car. It is not easy to claim this benefit and if your claim is refused you should seek legal advice.
See Fact Sheet: I’ve had a car accident and I’m uninsured!
What if I have a dispute about the way my claim is paid or how my car is repaired?
You need to write to the insurer and raise a dispute. See below for a sample letter.
Re: My car insurance claim
I refer to the above claim.
I wish to raise a dispute about [the amount you have agreed to pay me/the poor quality of the repairs to my car.]
[Outline all issues in more detail setting out what the insurer has done and why you disagree with it.]
I look forward to your written response within 14 days of the date of this letter.
If the insurer refuses to fix the problem you should confirm this in writing.
If the insurer confirms their refusal to fix the problem then you should complain to the Financial Ombudsman Service – General Insurance Division (www.fos.org.au).