If you own an insured motor vehicle and you have ever had to claim from your 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.
Richard Green, National Director of SAMBRA, the South African Motor Body Repairers’ Association, a proud association of the Retail Motor Industry Organisation (RMI), says SAMBRA, which represents almost 1,000 motor body repair businesses across South Africa and accounting for over 80% of all insured repair claims in the country, often receives queries from customers who are not 100% sure about how their excess works.
The Ombudsman for Short-Term Insurance recently released an article providing some excellent informative content explaining the various scenarios. Green explains that the primary reason for an excess is to ensure motorists do not feel tempted to claim for every small loss. It is there for when you cannot afford to pay for a loss yourself and is designed to eliminate small value claims which have a high administrative cost relative to the value of the claim.
The economics are sound. It is like having medical aid to a certain extent.
“If there are too many claims premiums become unaffordable for all members so keeping claims to a responsible level helps keep premiums lower for all policyholders,” says Green.
The Ombudsman explain that not all excesses are the same. He says there are many different excesses and the extent these apply to you will depend on the agreement you have reached 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 premium.
- Additional excess: The insurer charges an additional excess when the policy holder is deemed to be high risk i.e. Under 25 years old or has had a licence for fewer than two years.
- Imposed excess: This sometimes happens because of the number of claims you have had or for other factors which may mean you are more likely to make a claim.
There is also an insured excess one can consider. This is a separate policy that can be taken out to cover the excess you have agreed to pay with your insurer. In the event of an accident your excess policy will then fund the agreed excess portion of the claim.
Green agrees with the Ombudsman saying the onus is on the insurer to bring these excesses to your attention at the time the contract is entered into or at any time when there is a change in the excess.
There can be an excess waiver where you do away completely with an excess but you do end up paying a bit more on your premium.
“You need to weigh up your monthly finances and assess your risk and then 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. Green says it is worth checking this with your insurer because the Ombudsman agrees that if the insurer does not manage the recovery, you can elect to do this yourself with your insurer’s permission and proceed to recover your excess directly from the third party.
“Not everyone knows this,” says Green, “so 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 only dispute it. Green says the potential consequence of not paying is that you could, for example, end up having to pay storage costs to the repairer who ends up doing the repairs on your car while you dispute the excess with your insurer.
“In summary it is better, if you have a dispute with your insurer relating to any aspect of your car excess, 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 Short term insurance,” concludes Green.