Sunday, April 13, 2008

Inflated injury claims

Dear Mr Tan
I assume you must have read the article in the Sunday Times on inflated car insurance claims. When you were at NTUC you implemented a rule whereby all car insurance policies at NTUC requires the insured to agree to use only workshops designated by NTUC. I believe that also covered all claims by 3rd parties. It was a good measure but not popular with many insurance companies who decided not to follow your footsteps. I wondered why.

It seemed that insurance companies when they met with 3rd party claims, they are very eager to settle the claim even when they are inflated. The excuse they give is that they do not wish to undergo a long legal process so it is easier to settle even if the claim is many times higher than what is really required to repair the car. Is this the case?

I have had experience of this nature before but the insurance company is very evasive when I question them. They are also very unwilling to disclose the amount the claim they have settled. Why is this so?

The end result is that I end up giving up my no claim bonus. Is there something we can do to nip this problem. I have a healthy suspicion that the insurance companies actually encourage this practise. Your views would be appreciated

REPLY
Here are my views. This is a difficult problem. It is difficult to solve.

The party that can solve it is the Government.They have to pass a law to make sure that people who cheat by inflating claims are severely dealt with. If the Government does not want to pass a law, then the insurance companies will continue to face difficulty in dealing with this matter. And the consumers will have to pay higher premiums.

3 comments:

  1. I had a similar experience. I was the proud owner of my new Honda for about a year when I met with an accident in Dec 07 and I thought I was not in the wrong at all.

    The driver of the other car tried to claim for damages from me via her own insurance company (INCOME) but I think her insurance company thought the claim had no merit. Subsequently, she engaged a lawyer to handle the claims.

    My insurance company told me they will handle the case. I initally thought they will get back to me for more detailed facts of the case. To my surprise, they wrote a few weeks later to say that the case had been settled with the other party (without getting back to me).

    Now, I probably have to pay more premiums because of the indifference and (maybe) incompetence of my own insurance company.

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  2. I do not think we need the government to solve this issue on inflated claims.

    How does a repair shop come up with the actual amount of the repair cost? What we need is a system that does the billing. (An itemized bill , including the amount of man hours required to repair the car).

    In the US, they have a unified system of every car brands, parts - assembly, disassembly, and approximate many man hours to fix or repair parts of the car. Costs of parts are more or less fixed, with of course, price differing from OEM or after market components.

    Repair companies will then use this system to submit the quote to the relevant insurance companies for their claims. Of course, you will need to submit pictures with the quotes for assessment. In return, motor insurance companies will be able to assess if this claim is excessive.

    The accessors may have to make a trip down to the workshop to do a proper assessment on his own, say if claims are more than say, SGD5000.

    Example:
    Assume your rear bumper got hit. Repair Shop quote.

    Remove Bumper .5 hr 10/Hr $5
    Remove Hood 2hr 10/hr $10

    New Hood Unit Price $300
    Spray Paint $150

    New Bumper $180
    Spray Paint $120

    Fix back bumper 2hrs 10/hr $20
    Fix back Hood 2 hrs 10/hr $20


    Total $805 (Comes with 1 yr workmanship warranty,because, all parts are original from manufacturer)

    The accessor may quote differently based on his assessment.

    He can replace the bumper, and say if the hood is not too severely damaged, he may say it can be knocked back and spray painted without sacrificing safety.

    The accessors' quote may look like this.

    Remove Bumper .5 hr 15/Hr $7.50
    Remove Hood 1hr 15/hr $15

    Repair Hood 4 hrs 15/hr $60
    Spray Paint $150

    New Bumper $180
    Spray Paint $120

    Fix back bumper 1hrs 15/hr $15
    Fix back Hood 1 hrs 15/hr $15

    Total $562.50 (No workmanship warranty)

    Hence, it all falls on the insurance industry to come up with a system, say minimal or averaged cost of a man hour.

    It is also up to the insurance company to say if the owner is willing to use after market or OEM parts, they will take the NCD into consideration and raise his premiums by X%. (Of course, bearing in mind that this may be hsi first accident or claim or Not at fault claim).

    With this system in place, they can then use this as a guide for car yearly insurance premiums.

    Motor insurance companies also should exclude members who are residing in the same address in the policy from operating the vehicle for more than 15 days in a year.

    Meaning, only the person who is named in the policy is covered should he get into a car wreck. Other than him, will still be covered say if your wife runs some errands and rarely use your car (Less than 15 times in a year).

    It would be good to include members who are in the same residence as a named driver. Say, your brother or your teenage son.

    Of course, by including your teenage son who just got his license, the premiums will go up as the risk now for the motor insurance company is higher.

    Having a record will of all drivers would also benefit motor insuruance companies because, they will have the data base of the person's driving records. That way, when they are financially ready to own a car, motor insurance companies will then be able to make better and proper assessment if this person is a high or low risk.

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  3. I wonder why there are no control on the prices of repair, even at authorized workshops. Both workshops and insurers are not feeling the pinch because it is ultimately the policyholders are paying for the premium.

    Am I getting the right picture on inflated claims?

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