Insurance 101. Questions and Answers.

[MonSqueek]

This thread is a collection of previous posts about insurance and a place to ask insurance questions.

Please limit this thread to general questions and answers only. No opinions, insurance company bashing, or self appointed experts. If you wish to discuss your opinion please start a new thread.

By general questions I ask that you do not name companies, state premiums or other specific details of your policy.

I can generalise, I can try to explain the \"mechanics\" or principles behind insurance and define insurance related terms but, I can not give advice of any nature or my opinion- it would constitute a breach of the Financial Services Reform Act as I am not licenced to do so. I will also not be able to give stats and specific figures or any other commercially sensitive information that may risk me loosing my job.

The only advice I can give is that you read the product discloure statement (policy booklet) that comes with your policy and refer to your specific insurer for futher information.

I am creating this thread in an attempt to help educate people about how their insurace really works. So many people buy their policy with no real clue what they are purchasing or how it works.

It drives me to the brink of insanity that every one is an expert and then they spread their \"knowlege\" thus resulting in more and more misconceptions.

Maybe if I can educate just a few of you it will result in less stupid customers that I have to deal with day to day.

If this thread proves to be of any use then perhaps we can request it be made into a sticky.

[MonSqueek]

Copied from: http://www.mx5cartalk.com/viewtopic.php?t=29122&postdays=0&postorder=asc&start=0

The criteria aren't the same for every insurance company - they all have different guidelines which they work by, so for that reason alone, and FAQ type thing is pointless and would only create more confusion and heresay.

Aside from all of that, if an employee in the industry was to go around putting that sort of specific info on the web they could expect to, at best, lose their job.

Once again, anyone reading this, if you have a question about your policy or the policy of a company you are considering signing up with, phone them and ask. Simple. And they will give you the correct answers. Not the conflicting replies which sometimes appear on web forums

I first insured with Shannons in 2004 & the following is the movement in Agreed Value & Premium:
2004 $28500 $482.
2005 $27100 $455.
2006 $24000 $412.
2007 $21100 $489.
So the reason for the big premium hike in 2007 would be...

...Insurance companies in general, suffering big losses in 06/07.

Shannons are owned by the same people as AAMI, and now Suncorp, so big losses in the general insurance areas have to be picked up across their businesses. I think I've mentioned this before Rocky - cyclone Larry was a big hit to all insurers. They can't take a hit of payouts like that and then not build up their reserves again. Another disaster soon after could see them collapse. Do you want to be the first in line behind the last guy to get paid before they declared bankruptcy?

I have policy's with two different insurance company's for all our cars, both agreed(MX5) and market value for the others. With every policy I have received a product disclosure statement, outlining my obligations and the insurance company's obs to me. Both companies have provided plain English policies with a detailed description of the terminology used. The Shannons rep explained the difference between agreed and market value and the pros and cons of both. Maybe I've been lucky with the reps and agents. I always think if it sounds too good to be true it probably is, and buyer beware.
Terry

Yes, insurance companies have a legal obligation to provide the prodcut disclosure statement (policy booklet) in plain english... However most people dont read them. If in doubt call your insurer for futher clarification.

Secondly, my White SP (one of only two in the world remember) is for all intents and purposes irreplacable. Sure you could make a replica, but it wouldn't be the same thing. I think its not unreasonable to expect a car such as this to attract a premium sale price. Although I do agree that this is to be tested, judging by the emails I got when Darby "sold" my SP on my behalf the price could well be above the standard going rate for a "normal" SP.

The colour of a car has no impact on its value in the true sense of the word. A car must have paint, therefore from an insurance perspective it could be standard hot pink for all they cared. The fact yours is white is neither here nor there. The additional "value" you place on it because of its rarity of the colour is only sentimental. Sadly, this does not translate into $$$ on the redbook/glasses guide. The only exception to this is when it is a custom modified job (perhaps camelon paint or airbrushed graphics for example) which you would have to list as a modification on your policy.

Why is there an agreed value option in the first place?

The agreed value allows for certinaty - not profit. Market values stats are updated regularly where as an agreed value will be fixed for the policy year. Agreed values are depreciated automatically at renewal.

Well the options for an insurance company are this:

Leave the agreed value alone.... 5 years later the car is still insured for the inital value.

Hire hundreds of new consultants to spend day in day out calling each policy holder with an agreed value at their renewal time to renegotioate or insist that the vech is taken each year to an assesment center to renegotiate. (costly exercise either way resulting in higher premiums across the board)

Automaticaly depreciate at renewal and print the new value on the renewal documents, if the renewal is payed then the insured has agreeded to the new policy terms and conditions.

What would you think the sound business practice would be?

When an insurance company sends out their renewal of your policy, it is in effect, an offer for the following 12 months of cover.

If you don't like the offer, you have the option to talk to them and negotiate. Put forward you viewpoint in favour of your reasoning for a change in their offer...

[MonSqueek]

Copied from http://www.mx5cartalk.com/viewtopic.php?t=18802

Out of interest (and without hijacking the thread too much) - do you know why insurance premiums don't take driver history into account? My recent accident was the first car insurance claim I've ever made (in 18 years of driving) and I've never had so much as a parking ticket. Why doesn't that count for anything when it comes to working out insurance risk?

Probably becuase it would be impossible for you to prove it, and secondly companys /transport/police do not keep records that long to validate your claim, however if you had been with the same company for 18 years that at least would have a partial record etc.
- B

Driver hystory is taken into account to some degree. This is reflected in ratings, and also the duty of disclosure questions. Just try and take a new policy if youve lost your licence mutiple times, had many claims, and mutiple recent offenses of a significant nature. Either you will be refused insurance (not a fun part of my job) or you may have special excess applied and premium is affected particularly with rating drops.

Older cars can be more expensive to insure as they have more of a claims hystory, also, as they get cheaper (loss of value) younger drivers can begin to afford them hence the risk rises .. (which is why a new hatchback worth 16k new can cost more to insure then a new sedan valued at 30k new)

Agreed value isnt all it cracked up to be - check the fine print of your policy - even with an agreed vaule you can sometimes get less then what you agreed on.

My advice on all policies is compare what your buying for what price .. How much liablity cover do you get? do you get choice of repaier? are the repairs garenteed?

BEWARE - Allways list ALL modifications on your policy - or they can refuse or reduce a claim

[MonSqueek]

Copied from:

http://www.aus-cartalk.com/viewtopic.php?t=27210&highlight=&sid=dbe5eef9ff2c1c622d13509771fac674

There are many different factors which go into arriving at a premium.

THE REASON that premiums have gone up this year, with most insurance companies, on every car, home and contents policy, is because of an unusually high number of claims in the last 12 to 18 months. Cyclone larry being the main cause....

That will probably remain similar over the next couple of years until the insurance industry has recovered from the payouts it had to make as a result of that cyclone, and also to a lesser extent, the Newcastle floods.

You can't expect insurance companies to pay out hundreds of millions of dollars more than they normally would, and then not need to recover that money.

One reason premiums dont automatically come down when policies renew is:

I would think it's because the cost to repair cars hasn't come down.
You are looking at the premium and the cost to replace the car. I am sure the insurance company factors in a higher risk of you needing it repaired rather than replaced (paid out).

Just because a veichle decresases in market value does not automatically decrease its risk. In some cases it can actually increase the risk.

I have just looked at the paperwork again and I see that they say "We may have adjusted the Agreed Value of your vehicle to reflect market trends so please make sure that you agree with this valuation and that the level of cover is adequate".

If that was on a renewal notice then yes, they can make a change at renewal time. When you insure your car, you insure it for 12 months. There is no obligation from either party, to continue a policy for longer than that period. A policy is "re-negotiated" at renewal time. Some insurance companies will insure for an agreed value, which may then revert to a lesser value at the time of a claim. The wording would be something like "agreed value, or market value, whichever is lesser". I'd suggest you phone the companies you are comparing and ask them where they stand on that.

[/quote]

[MonSqueek]

Copied from: http://www.aus-cartalk.com/viewtopic.php?p=365747&sid=16976414af0e69ec10c6692553693009

Everyones situation is different. You can't compare premuims with anyone else. As Caffeine showed, the difference can be huge for the same person with the same car.

Both my cars are insured with Shannons. One of them is classed by them as 'highly modified' and has one of those dreaded turbo things. The premium on that car is under $500 from memory. My 5 is a similar price. How is any of that relevant to what anyone else is paying for insurance?? It's not.
All that you can do is phone around, and choose the best cover for your situation. Not every insurer is going to offer you cover, or even give you a quote.

Copied from: http://www.aus-cartalk.com/viewtopic.php?t=27956&sid=bdad5a129752cf05c0e56ad9d9eeefa3

There are so many variables which go into a premium. No matter what anyone tells you their insurance costs, it will be irrelevent because their situation will be different to yours.

[MonSqueek]

Copied from http://www.aus-cartalk.com/viewtopic.php?t=22572&highlight=insurance

I work in insurance, every day I give out hundreds of quotes on all manner of vechiles. My pet hate is stupid people who refuse to be educated about how a preimum is calculated.

I dont care how much you brothers aunt's husband pays for a simular car through the same company. Your premium will probably be diffrent.

The big factors taken into account when calculating a premium include:
-Age
-Driving Experiance
-Driving history (not so much speeding fines, though they count, but more importantly accidents & incidents)
-Address - Some companys (not all) will also take into account the garaged situation of the car.
-Year, Make, Model AND SERIES - eg a clubman may differ from a NA and a NA6 could be diffrent from an NA8.

as well as any discounts you may be entiled to. eg Multipolicy discounts, Member discounts, years of insurance discounts (how long you have been with the company)

you can pay monthly BUT you have bought a 12 month policy and if your car is totalled they will deduct the remainder of the (as yet unpaid) policy from your payout

Change companies - they can't charge you for something you're not using.

Actually they can. As an insurance policy is a contractual obligation - If THEY pay you out (eg: you hit power pole - write off your own car) they have forfilled their end of the contract and as such they are entilted to the full premium.

However, if you are not at fault and YOUR comany didnt have to pay you out (Joe bloggs writes off your car when he T-boned you, His company pay for the damage of your car) then your entilted to pro rata refund or able to cancel the policy and have no futher monthly deductions debited.

so far, if you want CHEAP insurance.. hotline or budget direct, u can't beat em!!!

Also with the budget insurers check the policy documents for exactly what you are and are not covered for. Particularly the ammount of liability cover, weather after an accident towing is covered and also the claims process. Is there alot of fussing about? Paper work? 24hr teleclaims line? Do you have a choice of reparier?

GIO are about $1500 p/yr and justcar $1800 - both take mods - just tell them! [im rating one, 31, no records n car is comprehensivly covered!!!]

not happy about my muffler being a performance "modification".. pfft

"Modification" from an insurance point of view includes anything that wasnt in the standard manafacture. That includes aftermarket accessories eg - cd/Mp3 player, dealler fitted options - even if they are genuine Mazda parts.

"Preformance modifications" are modifications that in any way alter the preformance of the vechile. A cd player is not a preformace modification, an exhaust system is.

Make sure you delacre all and any modifications to your insurer as these can significantly impact risk and can be a basis for denying a claim if they were not disclosed.

I've insured 5 cars in the past year each one with a different company 'cos one that gives a good price one one car will be most expensive on another.

Diffrent companies can have diffrent premiums of diffrent cars. This is based on internal risk statistics. If they have a lot of a particular car insured and therefor a lot of claims on that particualr type of car, the premium will increase for that car....

[Caffeine]

You broke the page layout!

[MonSqueek]

Ooops .. I thought It was just my screen it was showing funny on. Wonder how I managed that... or how to fix it?

[marcusus]

format c:
That'll fix it good

Meanwhile, good idea. Hopefully this will save you some grief down the track.

[redshoes]

God, Mon - what a crack up!! All your hard work and all the guys are going on about is the funny change in the page!! (and i just can't stop laughing, sorry! )

BTW, Thanks for all the hard work.
But

[Ajay]

very useful and good job on messing up the page

[mr_rotary]

I have dríven imported vehicles many years due to personal preferences. Those vehicles still had to have all the safety standards as the Australian vehicles to comply. Parts for each imported vehicle I have had where also easily available through the dealers here and never had to search over seas for any particular part. All vehicles I owned at some time had also been sold on the Australian market.

Why is it when you purchase an 'imported' vehicle (even though all cars are imported!) that most insurance company's will not insure you?

I have always had to argue this point to the insurance operator and can never get a straight answer from anyone.

[GP]

Didn't have that problem, The Insurance companies up here seem to treat them the same. As long as It has the proper Mod plate.

[lowmiata]

Didn't have that problem, The Insurance companies up here seem to treat them the same. As long as It has the proper Mod plate.

GP,
No they don't! they are different.

Mr Rotary,
It was once explained to me that If you bought an import it has not gone through crash testing, or any of that stuff

For example

You could buy a N14 pulsar in 1992 Fully imported car from japan
it has been crash tested and adr approved on the basis of passing all the adr approvals

you can buy a 1992 pulsar GTiR in 1998 personally imported from japan
it has not been crash tested it has not passed on the basis of pasing the adr checks

so a its much cheaper and a better car but....

you get no dealer support
and insurance is a pita

Why?

Along time ago rules were put into place between car manufactures and insurance companies etc
too not support imported cars as they are detrimental to our ecconomy

you only have to look at New Zeland to see what happens when there are no restrictions on what you can import.

For this reason it will always be cheaper to insure the aus built/delivered equivelant
as these restrictions still stand

These days though they (insurance companies) have to remain competitive so they will insure imports on a case by case basis.

After my first two cars I really wanted imports 180's silvia etc but never got one due to the insurance costs

12 months ago I bought an imported 4x4 and all this came flooding back to me!
I have since sold that and own an australian built car( )

Because the eunos roadster etc is exactly the same there are not to many dramas with parts etc the main reason this statement comes into play is with more exotic cars like say a toyota sera(gull wing car)

insurance companies are not only insuring your risk but the risk that they might have to pay a premium price for a part because they have to go to a specific wreecker who will demand what ever he wants for that part because he is the only one that stocks it

rather than the insurance company ringing up toyota and saying we need this, toyota says yep no worries.

All imports are tarred with the same brush

[rjastra2]

Along time ago rules were put into place between car manufactures and insurance companies etc
too not support imported cars as they are detrimental to our ecconomy

Conspiracy theory

I would have thought the insurance companies reluctance to insure grey import vehicles would be:

1. Lack of a ready supply of new parts for repair work
2. Unsure resale/market values
3. The type of people who buy them.. usually high performance vehicles.