‘Betterment’ in motor insurance explained
WITH reference to the recent spate of letters on the “betterment factor” in motor insurance, the General Insurance Association of Malaysia (Piam) would like to provide more information to the public.
The basic premise of a motor insurance policy is to place the car owner in the same condition as he would have been in before an accident occurs. Betterment will apply when, in the course of repairing an accident-damaged vehicle, a new part is used to replace an old part.
Betterment is a portion of the cost car owners have to bear when a damaged vehicle part is replaced with a brand new original part. As the car will be in a better condition compared to prior to the accident, the insurance company will require the car owner to bear the difference in costs. This is based on a scale of betterment adopted by the insurance industry as shown in the table.
Consumers have the option to purchase new add-on insurance cover such as “waiver of betterment” or request for second-hand parts to avoid betterment charges.
The association wishes to remind all motorists that even if the third party is fully liable for causing your accident, he or she cannot be responsible for the ageing and depreciating value of your car. In practice, permanent non-moveable parts of a car (eg car door, bonnet, mudguard or boot cover) are hardly considered for depreciation because these items are usually repaired instead of being replaced.
The items that are subjected to depreciation are generally communicated to the owner. This is the practice in Malaysia. Other countries may have their own rules in their respective jurisdictions.
The liberalisation of motor insurance in Malaysia started in July 2016. The general insurance industry is moving towards full liberalisation in phases, with many new and innovative products being launched to meet the evolving needs of consumers. A total of 66 new motor products have been launched in the market so far.
We advise consumers to shop around for the cover that best suits their needs and budget. Policy holders are advised to read the terms and conditions of their motor policy carefully so that they are fully aware of their insurance cover and what they are entitled to claim in the event of an accident.
In the event of a dispute on motor insurance claims with the insurer, consumers can lodge their complaints directly with the Ombudsman for Financial Services (OFS) which is the independent alternative dispute resolution channel. Piam is pleased to note that the number of consumer disputes has reduced by almost 50% (291 motor cases in 2017 to 150 in 2018) according to the latest data issued by OFS, reflecting better customer engagement and complaints management by motor insurers.
Consumers can refer to Piam’s website piam.org.my for more information on motor Insurance.