Another lesson learned from the US when it comes to motor

Like many things in the United States, and particularly when it comes to insurance there a lot of differences. I am looking at motor insurance.

No matter how old you are and/or your level of driving experience you may have in another country, if you are an expat or new resident, it counts for nothing and you start from scratch as if you are a new driver.

In my case, my daughter has been living in Chicago for 5 years studying for her doctorate. Living in the ‘loop’ (central business district) in this city with loads of public transport there was no need to have a car. To complete the degree she has to do a one year residency and she selected Phoenix Arizona as her number 1 choice and got it. Phoenix is like LA in that you need a car to get around. The cost of insurance however, due to the penalty for not having US driving experience is cost prohibitive. She worked out she could catch an Uber to and from work every day and getting groceries etc delivered it would be less than the cost of insurance let alone petrol (gas) depreciation and having the hassle of selling the car when she returns to Australia.

Had she got a US licence when she first went there and had a 5 year clean driving and accident record it would have been around 1/3rd the cost and she may well have got the car for the convenience sake.

The other issue that she discovered was like home insurance, the basic liability coverage limits are ridiculously inadequate. The standard is $15,000 for bodily injury under a comprehensive motor insurance policy. You do not have anything with your registration. If you consider the really high cost of hospital and medical treatment it shows how inadequate such a limit is.

Similar standard low limits apply for third party property damage. I would hate to have the $15,000 limit and cause a semi trailer to overturn.

Yes, you can buy more but to get it to even a $1 million coverage significantly adds to the cost.

When compared to our level of coverage, we are way better off in Australia and New Zealand.

 

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2 words of warning regarding motor vehicle claims

On one of the television channels special report shows they had a segment last week criticising the insurance industry, including a broker, over damage to a vehicle that had been insured for only third party property damage.

This form of cover is risky in itself as there is no cover for damage to the vehicle when the driver themselves is at fault and/or if it is damaged whilst parked and the person that hit the vehicle does not leave an honest note. Further, there is no cover for weather perils or if the car catches fire or is stolen.

Having said this there are fire, theft and third party property damage covers available, but they are still not as good as comprehensive.

I do not know the circumstances of the matter and cannot comment as to why the other vehicles insurer is not coming to the party. There may be an exclusion such as drink driving, unregistered vehicle, or the vehicle may have been un-roadworthy. it is possible that the insurance may have expired. These are all risks you take when you do not have full comprehensive insurance.

In addition, to remind people of this issue I also want to again warn that there are a lot of unscrupulous firms preying on unsuspecting people. They typically focus on people in the lower socioeconomic community. This group of course can least afford to be caught up in the scam financially and often do not have the training or experience to know how to fight the fraud.

What we have seen is such a person, end up with a repair bill of say $10,000, plus a hire car bill of over $25,000, kindly provided by the scammer, when the damaged car has a net value after salvage of say $5,000.

This is becoming a major problem in Australia, along with staged accidents and dodgy repairs. It was great to see arrests reported a little while back on fake injury claims and I know the insurance industry is throwing a lot of resources on building the case against many others as well.

The sooner the better as it sickens that any one is caught by scammers but particularly those who are already victims and can least afford it.

Any journalists out there please be careful of the companies you inadvertently promote in your programs and please go back after a few months and ensure that the whole thing has had a good ending for the innocent party.

 

 

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What happens when the V8 super cars knock on your door?

Dear Prof. Manning,

I find myself in a difficult situation and have not been able to get any clear guidance, except to contact you. I’ll try and keep it short mainly because I am now thoroughly confused and overwhelmed.

We live in Newcastle, our home is an 1890’s Terrace listed on the State Heritage Register.

We have the V8 Supercar Race touted to be heading up our Street. The track will be 3 meters from our home.  This has never been done before and all the National and International Standards have based their health and safety recommendations on a distance of 30 meters from the track, not 3 meters. I have not been able to get clear information of how Supercars will “adapt” the depth and type of safety barriers, to protect our home, given we are so close to the track.

Supercars and Destination NSW have told us very little except there will be no compensation and that any insurance will be up to us, individually. Council just don’t answer emails.

I’ve spoken to our Home insurer (NRMA) who said our policy still stands but that damage to our home will be done on a “case by case” basis as they have nothing to compare it to. They can’t put anything in writing and they won’t guarantee that damage will be assessed in favour of cover. They then referred me to The Insurance Council, who straight away, sent me on to a phone number for National Insurance Broker register, who then sent me onto The Markey Group in Newcastle, who then gave me advice to speak with LMI Group.

So far, no one can give me any guidance on protection for my Home or the people in it, during construction of the race track which will be extensive or during the days of the race every year. I have not been able to get any quotes, no guarantee’s and very little constructive advice because as they all said, they have nothing to base their advice or cost on and no one is sure who to send out to us, to do a quote. Therefore, who would they send to give us a loss assessment if there is damage and then what would they base that assessment decision on, if this situation has no comparison? Will this car race situation increase the cost of our insurance policies in the future? No answers to these questions either.

Would you have any advice? If we are to pay for an assessor I’d like to know they were the right person to ask. There are many others in our situation.

Kind regards

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Insurance – Unfairly vilified

The media, instilling the incorrect message into the heads of the public.

This week on FM Radio, Triple M, the insurance industry was once again vilified, this time by the hosts of breakfast radio.

The background of the matter was that one of the journalists was hit in the rear while driving across the Bolte bridge, and as a result of the hit, was pushed into the vehicle in front of him. The vehicle that caused the accident, failed to stop and the police nor City-link would assist with providing the registration number of the vehicle that caused the accident.

The insurer, in this case GIO, were criticised because they required the insured to pay the policy excess.

The reality is, a policy excess means that the insured is responsible to pay the first amount as shown on the schedule for any claim under the policy. The size of the excess is reflected in the premium charged on the policy. To make it easier for clients and as a value add, many insurers including GIO, have been waiving the Insured’s need to pay the excess where a third party who was 100% responsible is identified. This probably saves them the hassle of collecting the excess and then refunding it. But for whatever reason, it is to the Insured’s benefit that this process takes place.

Where this is not possible, then in the first instance the Insured is required and should, based on the price paid for the product, pay the excess. If during the recovery process the insurer is able to identify the vehicle and a successfully recovery is able to be retained from the third party, then the excess will be refunded.

As the excess is by definition the first part of any claim, it is only reimbursed when the balance of the claim has been paid to the insurer.

Rather than demonising the insurance industry for the approach taken in this case, all the people who are not required to pay the excess when they can provide the registration number and details of the responsible party, should be appreciative of the no-fault excess process.

With more and more people thinking it is acceptable to hit and run and an increase in road rage, coupled with a continued drop in price, my recommendation is to get a front and rear dash cam fitted to your vehicle and then this whole matter would be avoided.

The last point I would make is that whilst I was not present, I cannot understand with modern seat belts how the journalists chin hit the steering wheel if driving the vehicle correctly.

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Theft from motor vehicles

There has been another spate of theft from motor vehicles in my street and I thought I would share with you the advice that the police have issued to all the residents.

  • Do not leave spare keys or keys of other vehicles or house keys in your car

You will recall in an earlier post that I did warn thieves are seeking the service key that is left in some high end motor vehicles.

  • Consider where you keep your garage remote control.

If you leave this in your car and your garage has access to your house, the thieves suddenly have access to your entire home through the garage door. View full post…

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A ‘Claytons’ Insurance Policy

Claytons Drink – advertisement www.youtube.com/watch?v=ylH43Tcaj60

Many of you will remember the old advertisement which stated Claytons is the drink you have when you’re not having a drink.

It would appear that some of the motor vehicle hire insurance contracts are the insurance contract you think you have when you don’t have any at all.

This sort of thing certainly goes against the ‘Make Insurance Great Again’ Campaign I am working on

This statement is based on the following blog question: View full post…

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Blog Question: Schedule v Certificate of Currency v Certificate of Insurance

English writer and dramatist William Shakespeare quote. What's iI received the following question from someone new to general insurance.

Allan

  • Certificate of insurance
  • Certificate of currency
  • Schedule

What is the effective difference (if any) between these terms?

Regards

Oliver [surname and email provided]

Hi Oliver,

I could write a book on all that is going through my mind in preparing to reply to your question.

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The dangers of driving through flooded roads

Odessa Ukraine - September 20 2016: Driving cars on a flooded road during flooding caused by torrential rains. Cars float on water flooded streets. The disaster in Odessa September 20 2016.

Odessa Ukraine – September 20 2016: Driving cars on a flooded road during flooding caused by torrential rains. Cars float on water flooded streets. The disaster in Odessa September 20 2016.

With the heavy storms in Brisbane and Melbourne, it staggered me just how many drivers tried to drive through flooded roads. This is extremely dangerous to the point of being life threatening.

Even large four wheel drives have been caught out while the foolhardiness of some small car drivers beggars belief.

I can see more and more insurers making driving into flooded roads an exclusion under comprehensive motor vehicle policies. To me it is just courting danger and should not fall back to an insurer. If people had to wear the cost themselves it may just make people think twice. View full post…

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Blog Question: Business Interruption claim following damage to a motor vehicle at the situation

http://www.dreamstime.com/-image18708564This is the question put to me:

Hi Allan,

If a storm damages a truck on site, does the Insured have recourse for the hire cost through their AICOW [Additional Increase in Cost of Working] cover under their ISR [Industrial Special Risks] policy having successfully claimed under their motor policy for the damage?

Regards

Jorge [surname and email provided]

=======

My response was short and to the point.

On the face of it, the answer is yes as a result of the following memorandum found in the Mark IV version of the ISR policy

“REGISTERED VEHICLES AND / OR TRAILERS

 Notwithstanding the provisions of Property Exclusion 5, this Policy extends to include loss resulting from interruption of or interference with the Business occasioned by Damage to registered vehicles and/or trailers whilst such vehicles or trailers are at the Premises owned or occupied by the Insured; provided always that this Policy does not cover loss resulting from physical loss, destruction of or damage to such vehicles and/or trailers whilst they are being used on any public highway or local thoroughfare.”

What this means is that despite the ISR policy specifically excluding registered vehicles, there is nonetheless coverage for business interruption losses, including Additional Increase in Cost of Working cover following from damage to a vehicle. The vehicle needs to be at a named situation and there is no cover for road risk. But in your case, storm damage while the vehicle is parked at the Situation and/or Premises will trigger the coverage.

This same coverage is available in good quality business packs as well.

An excess may apply to the ISR policy.

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Rent out your driveway – great an income stream but what about your insurance

parking-appFollowing on from the commercial success of airbnb, other entrepreneurs have thought up ways for home owners to each a little extra income.

One way is for people to rent out their unused garage, carport or even their driveway. An example is ParkingMadeEasy.

With any commercial enterprise you or your client’s undertake from their home there is always the risk to consider. What happens if the car is stolen or damaged? Say one person drives their car into another. What happens if you have to move one of the cars yourself to let another one or your own out?

Another risk is if the driver injurers themselves while on your property. That will never happen. It may and I know of cases where it did happen while conducting garage sales.

The issue then is will you be covered? The vast majority of home and contents policies specifically exclude loss, damage or injury for both the ownership or use of a motor vehicle and b) while engaging in any business activity. Some do have a write back to the business activity exclusion for baby sitting services. Most have

Insurance is always coming up with new products. The non-insurance for airbnb has been solved and this latest idea will, if it becomes main stream will I am sure have an inexpensive insurance solution in time. There may well be one there I do not know about other than taking out a policy designed for businesses that work from home. Many policies also have a requirement that if you start a business from home you immediately advise the insurer. I have not tested whether they would accept the car park mini business or not.

Our industry has always been there to address new risks, new technologies and new norms. The sharing economy is fast becoming the new norm. The trouble is that the changes are just coming so thick and fast it will be challenging for us all to keep up, but keep up we must.

The purpose of this post is just a timely reminder to all to always consider the ramifications before you engage in any business activity. If in doubt always speak to an insurance broker.

Last note, I am in no way criticising the developers of ParkingMadeEasy, it may well be a great idea. I know I have looked longingly at empty driveways from time to time when I am searching for a park, say around a hospital or cultural event, not to mention the rip off prices charged by some. On this basis it sounds like a very good idea. Having said that, I have not used the system or any like it to either rent out or simply rent a spot. If any one has, please let me know the experience.

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