a simple guide to getting it right when buying insurance

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No Claims Discount Expires After 2 Years | Protected No Claims Discount Does Not Protect Your Premium | Manipulating Your Details to Gain a Better Price Could Invalidate Your Policy | You Don't Automatically Get Driving Other Cars With Comprehensive Cover | Should I Send Copies of Documents to My Broker/Insurer? Yes | Each Policy Earns It's Own No Claims Discount, You Can't Use It Twice | Insuring Your Child's Car In Your Name Is Called Fronting And Is Fraud! | Don't Assume Your Company Car No Claims Discount Will Be Accepted By Your New Insurer - Check First! | Counterpart Licences Abolished, You May Still Have To Provide a Code From DVLA to your Underwriters to Check Your Details | Motorbility Policies Do Not Earn a No Claims Discount | Motoring Endorsements Are Declarable For 5 Years

Fault Doesn’t Necessarily Mean “Your” Fault.

Fault to an Insurer Means They’re Unable To Recover Their Costs

Ask yourself; if it wasn’t law to require insurance to drive or use a motor vehicle on the roads in the UK, would you buy insurance?

A difficult question perhaps if your insurance costs are greater than the value of your vehicle. But, imagine the costs to you if you didn’t have insurance and caused an accident that was your fault with someone injured or killed. Other than the costs of the loss of life or life changing injuries to the other party/parties, the costs to you financially could be catastrophic.

So, insurance is a good thing, as it protects you and others from potential financial ruin (providing you advise all of your details correctly). What about when it’s not your fault, but the insurer closes their file as Fault? How is that fair?

In insurance there are two status’s in claims, Fault and Non-Fault. While a claim is “Open” or ongoing the status is Fault. Even if it’s clearly not your fault - you were sat at traffic lights and hit in rear for example - everyone involved in the claim is at fault. Until the insurers have agreed on liability or settlement and recovered their costs it is kept Open.

That’s not fair, I hear you cry. Maybe, but, the insurer has to protect itself and if they don’t could end up going bust if they have costs coming back on them and they haven’t set money aside (reserved) for the potential pay outs.

Imagine a scenario where the policyholder (Mr Reckless) calls his insurer to report a claim, stating he was hit in the rear by another person (Third Party). Mr Reckless’s insurer repairs his car for him under his comprehensive policy, knowing they will get their money back from the Third Parties insurer according to what Mr Reckless has told them. However, the Third Party (Mr Wright) reports the claim to his insurer, that a car pulled out of a side road at speed into his path and he slammed on his brakes, but was unable to avoid the collision, hitting the rear of Mr Reckless’s car. This would normally be a difficult case to disprove, as Mr Wright would normally be adjudged to be at fault, except Mr Wright has a witness (Mr Eagle) who saw the whole incident and gave his details to Mr Wright when Mr Reckless was ranting and inspecting the damage to his car.

In the scenario, if Mr Reckless’ insurer had closed their claim as Non-Fault assuming they are getting their money back from the Third Party, they would have miss accounted their records thinking they have more money than they actually do. Obviously, there are thousands of claims occurring everyday and miss accounting on a grand scale could end an insurer.

Some of you may remember Independent Insurance, which collapsed in 2001 due to deliberate miss-reserving of claims by senior management. This left 1,000 staff redundant and 400,000 policyholders without insurance, due to management trying to make the company look more profitable with reserving not being recorded properly. Inevitably, the company valued at the time to be worth £900 Million on the Stock Exchange collapsed. This brought about a criminal investigation by the Serious Fraud Squad and eventual imprisonment of Chief Executive Mark Bright (Seven Years), finance director Dennis Lomas (Four Years) and ex-deputy managing director Philip Condon (Three Years).

As you can see, not recording claims data correctly can leave insurers at risk of collapse and therefore they hold everyone involved in a claim to be at fault until liability is agreed and reserve accordingly until the claim is closed. Your no claims Bonus will also be help back as though it’s a Fault claim until it has been fully settled.

Fault Claims

This term doesn’t necessarily mean the accident or claim was your fault.  In insurance terms it means that your insurer was unable to recover all of their costs from a Third Party.  Also, an “open” claim is classed as Fault until such time that settlement has been received, even if you insurer has an acceptance of liability from the Third Party, they will be reluctant to change the claim status to non-fault.  A witness could suddenly come forward that might disprove what you’re saying occurred in the incident.

Things that might not be your fault, but fall under this category are:

Fire

Theft

Attempted Theft

Vandalism

Malicious Damage

Hit by unknown Third Party (e.g. Hit whilst parked unattended - no details left by Third Party)

A claim with a split liability settlement (50/50)

Storm Damage

Claims where the insurer may repudiate your claim:

Driving Whilst under the influence of Drink or Drugs

Attempted Suicide/Suicide

Deliberate Damage

Track Day incident (unless agreed with your insurer before and an additional premium paid - not many insurers will extend cover for this)

Acts of Terrorism (the UK Government will normally deal with the costs if your vehicle or property is damaged as a result of Terrorism - unless you’re the Terrorist!)

Fraud

Induced Accident

Crash for Cash Scams

Which of these claims do you need to disclose when buying insurance

Non-Fault Claim full recovery of costs

A previous named driver had a claim under your policy, but now they’re not on your insurance

Windscreen / window claims; chip repair or replacement

Claims you had under your car insurance policy, but now you’re buying motorcycle insurance

Your car was hit by another party and their insurer repaired your vehicle, not involving your insurer at all

All of them MUST be disclosed.

Whether you think a claim is relevant to an insurer or not has no bearing on what an underwriter wants to know. If you don’t think it’s relevant why would you not disclose it? The premium calculations will determine whether or not it is relevant and it’s not for you to decide. If the Insurers did not want to know about Non-Fault claims or windscreen claims then the question would read:

How many Fault Accidents or Theft, Vandalism or Malicious Damage claims have you had in the passed 5 years?

But, it doesn’t read like that. The question clearly states:

How many accidents, claims or incidents have you or any driver had (not the vehicle) irrespective of blame or whether a claim occurred in the passed 5 years?

Therefore, the wording tells you to disclose all claims, not just the ones YOU think are relevant, because if it’s not relevant it won’t change your price will it?

Which of these scenarios do you think should be settled Fault or Non-Fault ?

Your car is hit whilst parked by an unknown Third Party and you claim off your comprehensive policy

Car Stolen not Recovered - claim off Third Party, Fire & Theft cover

Head on collision on country lane both parties claim off their own comprehensive policies and both blame the other person, no witnesses

You pull out of side road into path of speeding car - no witnesses

Object falls off a lorry you’re following, damaging your car, but you don’t get any details of the lorry

These are all Fault claims.


Essentially there are three statuses for a claim; Open/Pending, Fault or Non-Fault. Open/Pending is classed as Fault even if it was clearly not your fault, because until your insurer recovers their full outlay and closes the claim as Non-Fault there is still the potential for the claim to be settled as Fault (when your insurer did not recover their outlay).


The scenario above (number 5) looks clear cut and should be Non-Fault, but what if a witness comes forward or CCTV footage showed that actually you reversed into the other car? Then the blame shifts to your insurer to deal with and settled as Fault when it was otherwise looking as Non-Fault.