Read the small print
May 7, 2019
A first-time car owner learned an expensive lesson about the realities of third-party insurance payouts after her car was stolen earlier this month.
Retail merchandiser Katherine Rybniski, 22, said she felt “anxious and overwhelmed” when her insurance company deducted a full year’s premium from her payout, despite her car being stolen only one month after she took out the policy.
Thieves stole her 1998 Mazda Demio from outside her house in Roseneath on April 7. Police found the car in a damaged condition in Stokes Valley two days later.
“They [the thieves] don’t know me and I never did anything to them.”
She said AA Insurance, with whom she had a third-party fire and theft insurance policy, paid her out only $800, despite the car being insured for $1700.
On a third-party fire and theft policy, if a car was damaged by fire or stolen, insurance companies would pay up to an agreed value to repair or replace it.
The insurance company deducted a $500 excess from the agreed value of $1700, and Rybinski said she believed they also deducted a further $400 from her payout because she was under 25 years of age.
However, AA Insurance senior communications representative Tracey Kelsall-Morris, said the company did not dock money from customers if they were under 25.
Before a claim could be settled the annual premium must be paid, she said. Sometimes insurers required a one-off annual payment, but they could also offer customers monthly payment options.
Therefore, Rybinski had only paid one-month worth of her annual premium, hence the further $400 deduction from her payout.
Insurance and Financial Services Ombudsman spokesperson Brendon O’Carroll, said while it might not be common knowledge that people had to pay out the remainder of an annual premium when a claim was made, “it’s very common to find this [annual premium payout] in a policy”.
O’Carroll said he felt New Zealanders were bad at reading their insurance policies.
Rybinksi admitted she had found it difficult to make sense of the small print on her policy contract.
AA Insurance had sent the car to one of their mechanics, who assessed the damage at $2,193.
Because the repairs of the car were worth more than the agreed value of $1700, AA Insurance classified her case as a total loss, commonly known as a ‘write-off’.
Because her car was considered a total loss, it became the property of AA Insurance, as per her insurance policy contract.
Rybinski said she was given the option to accept the $800 payout, or to buy the car back from AA Insurance for $400 and get it repaired through their mechanic for the quoted $2,193.
As per her policy contract, the repair work had to be done through the AA mechanic if she opted for the $400 buy back option. This would equal a total buy back of $2,593. Rybinski accepted the $800 payout.
O’Carroll said some insurance policies had a repairer benefit clause. The repairer benefit clause enabled policy holders to choose which mechanic repaired their car.
Rybinksi’s contract did not contain this clause.
He also said a person could request the list of repairs from their insurance company’s mechanic and get an independent quote if they felt the original quote was too high.
Rybinski did not seek an independent quote on the repairs for her car.
Rybinski said the car had previously belonged to her grandfather and was in great condition for its age. “I’ll never be able to buy a car that good for $800.”
Online auction site Trade Me listed 1998 Mazda Demios at buy now prices between $1700 to $2400.
Kelsall-Morris said that AA Insurance used independent registered motor vehicle valuers to help them determine the market value of a car.
These independent valuers provided AA Insurance with information on the market value of vehicles in New Zealand based on recent sales data from private sales and dealerships.
Rybinski said she was left feeling angry at the thieves and disappointed with the result of her payout.
She had to borrow her uncle’s car to get to work, and said his premium went up $80 a month because she was now on his insurance policy.
Kelsall-Morris said AA Insurance believed it was important for young people to have some form of car insurance.
She said if it was affordable and a person wanted to see a vehicle repaired or replaced, comprehensive cover was the highest form of protection available.
Fundamentally, third-party policies would cover your legal liability should you cause damage to someone else’s car or property.