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October 14, 2014

Insuring your car

On a recent trip to the USA, a friend of mine had to be admitted to Hospital for a day. A few tests and some pain killers later, they were later billed roughly $17,000.

Of course they had travel insurance so didn’t think too much of it. However nine months on and several phone calls (of varying levels of intensity), letters, emails and promises of action, the claim is only just now (at the time of writing) being assessed.

What this person came to realise was that the cheaper insurance is not necessarily as good as the more expensive policies that were overlooked. At the time of purchasing, the differences (aside from price) are largely imperceptible, but it becomes very clear when it comes time to claim. In this case, they paid for what they got.

This is the case with any insurance product, but in particular with the very competitive car insurance market. Each insurer has largely the same levels of risk with each policy so cheaper premiums mean they have to do more to mitigate this risk. What we have seen in the car industry is that the cheaper insurers often push harder at the time of claim – either through making the claims process more onerous or pushing the repairer to do the repairs cheaper. We have had one client that was required to take their car to three different repairers to have three separate jobs done – costing them a lot more time but helping the insurer minimise cost.

This is difficult to tell at the time of purchasing, but you should review the insurance company online before purchasing the policy and also use their Product Disclosure Statement (PDS) to fully understand who the insurer is, their claims process and who the underwriter is and, more importantly, compare with other policies. 

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