IFSO Case Study

In a recent complaint to the IFSO Scheme, Sai* was seriously injured in a car accident, and suffered more pain when his claim payment was $12,000 less than he expected. Sai and his partner were seriously injured in the accident, and his car was a total loss.

Sai had car insurance, with a sum insured of $26,000. The insurer obtained two market valuations and told Sai they would pay the market value of $18,000.

Sai made a complaint, because he believed he had “Agreed Value” cover and the insurer had to pay him $26,000.

Agreed Value is the amount you and your insurance company agree to insure your car for.

“’Agreed Value’ means you nominate what your car is worth if it is a total write-off,” says Karen. “Many owners choose it, even though it can have higher premiums than ‘Sum Insured’.

“However, ‘Agreed Value’ doesn’t mean it is an amount that never changes,” continues Karen. “The agreed value for your car is assessed annually at your policy renewal and it takes depreciation into account. In this case, Sai had taken out his vehicle insurance some years previously, so depreciation was a factor in the amount offered.”

Sai had arranged a “Sum Insured” policy. “Sum Insured” means the insurer pays either the value the vehicle has been insured for, or the market value of the vehicle at the time of the accident, whichever is less.

Sai complained to the IFSO Scheme saying he had always arranged “Agreed Value” insurance for his vehicles, and he believed the insurer knew that was what he thought he was doing, because of a comment he made in a telephone call about the “agreed amount”.

The IFSO Scheme investigated and found there was no misrepresentation made to Sai. Furthermore, he could not show he had suffered
any detriment, because the insurer had said that, if Sai had “Agreed Value” cover, the vehicle would have been depreciated each year and the “Agreed Value” would have been $16,650 at the time of the accident.

The IFSO Scheme found no evidence of a breach of the duty of good faith and found the insurer had paid the claim in accordance with the terms and conditions of the policy.

“All too often, not understanding insurance terms means consumers are going to be disappointed with the outcome,” says Karen.

“I’m concerned that misunderstanding hits people hard when stress levels are already extremely high. Checking your policy only takes a few minutes and could save you a lot of grief in the future.”

* name changed

June 2022

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