Talking about excess

PAY UP: EVEN WHEN INSURED YOU WILL HAVE TO PAY PORTION OF COSTS

Excess stops motorists from making low-value, high-admin claims.

If you own an insured motor vehicle and have had to claim from insurance you should be familiar with the word “excess”. An excess is simply the uninsured portion of your loss or that portion of the claim you must pay for.

Sambra (South African Motor Body Repairers’ Association) represents almost 1 000 motor body repair businesses in SA and accounts for over 80% of all insured repair claims, and its national director Richard Green says he often receives queries from customers not sure about how their excess works.

Green says the Ombudsman for Short-Term Insurance recently released an article providing some information on this topic.

The primary reason for an excess is to ensure motorists do not feel tempted to claim for every small loss which would have a high administrative cost relative to the value of the claim.

The Ombudsman explains that not all excesses are the same and their extent will depend on the agreement you reach with your insurer. These include:

Standard/basic excess

The insurer’s standard excess for the type of insurance.

Voluntary excess

An excess you may agree to carry in addition to your standard excess in return for a discount on your premium.

Additional excess

The insurer charges an additional excess when the policyholder is deemed to be high risk – under 25 years old or has had a licence for less than two years.

Imposed excess

This sometimes happens because of the number of claims you have made or for factors which may mean you are more likely to claim.

Green says there is also an insured excess one can consider.

This is a separate policy that covers the excess you have agreed to pay with your insurer.

In the event of an accident, your excess policy will fund the agreed excess portion of the claim.

Green says the onus is on the insurer to bring these excesses to your attention at the time the contract is entered into or if there is a change.

Sometimes there can be an excess waiver where you can do away completely with an excess but pay more on your premium.

“At the end of the day you need to speak to your insurer if you feel there could be a better option for you,” says Green.

The next important question is, who recovers the excess?

The Ombudsman says if someone else caused your loss, the insurer may be able to recover the cost of the claim, including your excess, from that party or their insurer. Your excess can then be reimbursed.

There is, however, no obligation on an insurer to recover the excess and the success of the claim depends on a number of factors, like if you were able to fully identify the other party, whether they admitted fault, whether there were any witnesses etc.

The Ombudsman agrees that if the insurer does not manage the recovery, you can elect to do this yourself with your insurer’s permission.

“Not everyone knows this,” says Green, “so its definitely worth the extra effort.”

Finally, what happens if there is a dispute?

The Ombudsman advises that in order to get your claim processed quickly, you need to pay your excess, even if you are unhappy with the amount, and then dispute it.

The potential consequence is that you could, for example, end up paying storage costs to the repairer who ends up doing the repairs while you are disputing the excess.

“In summary it is better to first try to resolve it with the insurer.

“If you are still not happy, then your next step is to contact the office of the Ombudsman for ShortTerm Insurance,” concludes Green.

If your insurer does not manage to recover the cost of the claim from the third party, you can, with permission, attempt to do so yourself. Richard Green National director: Sambra