How do I choose an insurance company for my car, and what level of coverage do you recommend? Penelope
There are about five dozen (!) insurance companies registered with the Insurance Regulatory Authority of Kenya, and most of them are members of the Association of Insurers of Kenya. About a dozen of them have good origins and reputations. The rest… vary.
There are three general levels of motor cover.
Insurance Act: This is mandatory, inexpensive and will not cost you anything. It protects others from any damage they may cause. In the same way, you are also covered by insurance against other motorists who damage you. Only in this context, the party making the claim must prove that the other party is at fault.
Third parties: This Insurance Act is usually with an additional cover for your own vehicle against “fire and theft”. Not more than that. Premiums are still relatively modest, but do not include damage to the vehicle itself in an accident. The nominal value of the burnt or stolen vehicle in case of a claim will be decided by the insurance company. If you want to be sure, you can get “agreed value” insurance, at an additional cost.
Comprehensive: This is a Third Party upgrade to include cover for your vehicle and yourself in the event of an accident, regardless of whether you are at fault or someone else. The premium is usually about seven percent of the value of your declared vehicle. Over this period can be reduced by the annual No Claims Discount (which can be lost if a claim is made). Double check that your comprehensive cover covers injury to the policyholder (or take out Personal Accident insurance too).
Whatever insurance company and cover you choose to make you legally compliant and reduce (not eliminate) your risk, remember that the insurance business model has small print, one-sided principles, conditions and exclusion clauses, too long and complicated for most holders the police. to be fully digested.
The result can be summed up by a quick reading of this single phrase: “They Win, You Lose.” Whatever the situation. That makes insurance companies one of the largest deposits in the economy.
If you insure, you will pay an annual premium. If you claim it will also cost the so-called “excess” of about Sh50,000, before repairs and before the insurance company will pay the balance.
Over the life of the insurance, the majority of policyholders will pay more in premiums than they will claim as compensation. They will always pay in advance. They will not get a refund.
What you do is: first, comply with the legal requirements; second, spread major financial shocks (with smaller losses but still certain); third, take some peace of mind by protecting yourself against “unaffordable” losses big enough to change your life – the damage you have no way to meet or correct.
In principle, insurance only covers the customer, not the victim, against the loss. So, the victim must take the perpetrator to court and win an award resulting in “defeat” to the perpetrator. So, in Third Party claims, proving “fault” is mandatory.
This can be an expensive process, with uncertain results, and it can take five years! But only if the Supreme Court Award of Liability and Quantum orders the criminal to pay, the criminal will suffer personal loss, at that time, and not before, Third Party insurance will be required to pay on his behalf.
Another possible scenario is that the owner-driver with Third Party cover is involved in an accident in which no one outside, but his passengers – often his wife and children, are seriously injured.
Third parties will cover family members, but not the driver. And the wife may have to sue her husband for payment (five years later), which still does not cover her own medical bills.
Insurance executives always have the discretion to approve a settlement more quickly, and this ethical issue is the difference between a reputable company and an opportunistic one.
In some countries, insurance companies have a knock-for-knock agreement between themselves, with the gap covered by legal cost savings, and where the insurance ombudsman may not be aware of the “beneficial” delay.
This is also one of the factors that can encourage the upgrade of the Third Party to “Comprehensive” insurance, which includes action, fire and theft cover, and also pays the customer for the cost of damage and injury itself, regardless of the customer. victim or perpetrator.
Insurance may provide immediate relief for marginal claims, but claims will cost you more in the long run.
Photo credit: Shutterstock
So even if you wait five years for the third-party insurance company to pay, your insurance will help repair your damage as quickly as possible. And the best will represent you in court.
But here comes the small print again. When a claim is paid, the customer must pay the “excess” (say the first Sh50,000) and will lose the no-claims discount, increasing the premium when re-insured.
Given the time and administrative palaver involved, which means it is not possible to claim for damage cost less than Sh100,000 … which is more than 99 percent of the “fender-bender” accident cost to repair, so no claim is made though. loss has suffered. Fair enough; for individual motorists the cost is unwelcome but affordable; for an industry that involves millions of people, this small fix will increase profits.
Insurance companies reason that avoiding these costs helps lower premiums. But they are not so good on the flip side: there is no provision for individual customers with an impeccable safety record over several decades agreeing to receive a higher excess (for example Sh300,000), in return for a lower premium. This puts the kibosh on one of the most rational approaches to insurance:
Don’t try or expect to insure “minor” things or events that you can pay for out of your own pocket (even with a grimace) without changing your life. Insurance only against “unaffordable” shocks.
The first principle of the insurance business model is that the customer will not “profit” from any cover. The policy should only reduce the loss rate.
Professional actuaries (people who predict the actual results of statistical evidence), tell insurance companies how much they should pay out each, say, 1,000 customers. Premiums are adjusted accordingly, with a good margin.
All policy income is received in advance (and invested at a strong interest rate) and is not refunded if there are no claims.
No Claims Discount is given progressively, but it stops at around 50 per cent, and even if there have been no claims on your record for years, you will pay a higher premium and possibly the full amount when you do make a claim.
Insurance may provide immediate relief for marginal claims, but claims will cost you more in the long run.
The insurance company is not at risk. They know (!) What the total claims will be, eliminating almost everything that cannot be understood, and a handful of downsides that are amply guaranteed in advance by the other 99 percent of customers who claim nothing.
That is not a risk. The same does not apply to you: your personal consequences are a one-to-one risk. One in a hundred industrial risk.
If you over-value the vehicle, the premium will increase (without assessment), but if you claim the pay-out can be based on the lower reassessed value.
If you under-value the vehicle to reduce the premium, any pay-out will be based on the under-value and then reduced further by the proportion of the under-valuation. That is, if you insure half of the actual value, you will be paid half of the declared value.
