Applying betterment is not the solution

IREFER to the report “Repair despair” ( The Star, Oct 19). Motor insurers in Malaysia apply betterment deduction when settling damage claims under the comprehensive policies for cars above five years old.

This is when they replace damaged parts with new original parts. They say their policyholders stand to gain when new original parts are used. I cannot see the point.

Betterment must refer to a situation where a policyholder will gain in terms of better performance or extended life of the car or parts when new original parts are used. In addition, betterment must result in better resale value of the car.

I have read the motor policy of two leading insurers in the United Kingdom. They do not apply betterment deduction but write in their policy a right to carry out the repairs using recycled, used, reconditioned or suitable parts where available.

Where such parts are not available, new original parts will be used without contribution from the policyholder towards betterment.

In addition, they guarantee the repairs for a good number of years.

No car owner would need to change a mudguard, bonnet, roof, boot lid, door or other body parts during the life span of the car unless due to corrosion or other causes.

Motor insurers have the right to apply betterment deduction for parts replaced because of corrosion or preaccident damage not made good before an accident took place.

They also have the right to apply betterment deduction for replacing parts which wear off over time and have a limited useful life such as tyres, belts, battery and other moving parts.

In the United States, the insurance regulators only allow betterment deduction to be applied to replacement of parts which wear off and have a limited life span as well as deduction for pre-accident damage to body parts.

In Malaysia, motor insurers do not seem to practise fairness to their policyholders when settling own damage claims for older cars.

The principle of indemnity seems to be ignored to stem deteriorating claims experience.

Applying betterment deduction is not the solution – increasing the premium for those policyholders who present a higher risk profile or had a bad claims record is the answer.

I often ask this question. If my motor insurer were to replace damaged body parts of my six-year-old car with new original parts - what would I gain? Nothing.

I would not have changed the body parts during the life span of the car unless due to corrosion or damage caused by accident.

In the interest of fairness, Bank Negara Malaysia should re-look at the practice of applying betterment deduction by motor insurers by coming out with a broader set of guidelines.

Betterment deduction should only be applied for parts which ought to have deduction but not across the board. In this way, policyholders would not be short-changed.

HUANG HENG HWAI Petaling Jaya