Many policyholders struggle to understand what an insurance excess is. They don’t understand why they have to pay this and especially how they can get their hands on these funds if they were not to blame for the accident resulting in the insurance claim!
In this discussion we would like to provide some clarity and advice on what to do once you made an insurance excess payment.
Definition of Insurance Excess
An excess is the first amount payable by you in the event of a loss, and is the uninsured portion of your loss, so when you submit a claim you’ll have to pay an excess. It usually has to be paid to the garage fixing your car once it is repaired before you can drive it away.
When you have to pay an excess for damages arising from an accident, it is irrelevant who was to blame for the accident, this serves to deter customers from submitting minor claims and/or fraudulent claims, and keeping premiums down.
An excess is an agreed amount of money that you the client is liable to pay in the event of a car insurance claim being settled. I.e. If your excess on your car is R3,000.00, and the damages amount to R50,000.00 the insurer will pay the remaining R47,000.00 once you the client has paid your excess to the repairer.
Advice Note: When you are comparing car insurance, try choosing to pay a higher excess as a way of lowering your premium. Voluntary excess is the amount you must pay towards a claim on top of your compulsory excess. The amount of voluntary excess is selected by the consumer when they take out their policy, and a higher voluntary excess usually means a lower premium.
[Definition from Insurance Glossary at carinsurance.arrivealive.co.za]
Why do I have to pay a car insurance excess even if the accident was not my fault?
You are always liable for the excess since the insurer does not place blame as criteria in order to determine whether you need to pay an excess or not.
It is important to note that the administrative cost of a car insurance claim is the same, regardless of who is at fault. If you are not at fault, you can still claim the excess amount back from the guilty party. Unfortunately, this can take a long time, especially if the guilty party isn’t insured.
Insurance excess explained with an example
The best way to describe insurance excess is to refer to an actual scenario and by way of asking a few questions and sharing the responses from an insurance company.
• The owner of an insured vehicle has his car rear –ended by another driver whilst being stationary at a stop street. Our vehicle owner is not at fault – but the other guy is.
• The other vehicle is not insured.
• Our vehicle owner now has to pay an amounts of excess in the repair of his vehicle.
1. Who is responsible to claim the excess already paid from the other driver? Will the process be communicated to the vehicle owner?
The owners’s insurer in terms of its rights of subrogation has the right to make the full recovery back from the negligent driver and also make the recovery in its Insured’s name. This recovery will also include the excess that its insured had to pay and they should begin the recovery process as soon as possible. This is stated in the policy but its good practice for the Insurer’s claims staff to communicate this to the insured at the time of the claim to make sure the insured does not prejudice the Insurer’s recovery in any way by doing a private deal for the recovery of his excess. This may endanger his whole claim.
2. Will the insurance company claim on behalf of the insured vehicle owner?
Yes the insurer company includes the full recovery claim in its recovery claim and not just its own portion including whatever legal costs result there from. They are free though to decide they do not want to make the recovery of the whole claim for whatever reason but then would have to allow the insured to make the recovery if they wanted to.
3. Are there instances when an excess may not be recovered?
There are indeed certain circumstances when an excess cannot be recovered, for example:
* You the insured do not have the guilty party’s details
* The guilty party does not have any income or assets to attach
* The legal costs outweigh the recovery costs (excess amount)
* The guilty party cannot be traced
* The merits of the claim do not justify the recovery of the excess
4. If the insurance company does not claim the excess – can the insured vehicle owner do so on his own? When would he be able to do so?
As stated above the insured would have to first get the consent from his insurer to waive the subrogation clause on the policy to allow him or her to make the recovery. More than likely it will be because the merits of the claim are tricky and the insurer does not believe it’s worth it or the amount to be recovered is so small it’s not worth the cost.
5. Is our insured vehicle owner [who was not at fault] to be penalized with increased premiums after the insurance claim?
Yes it may happen as many insurers only restore the no claims bonus if a full recovery has been made and certainly those companies who pay no-claim bonuses will in the main not pay out because of the claim, no matter whose fault it was. It’s not a “no blame” bonus but a no claim bonus
6. Is it possible to use the small claims court in such a claim?
Where the insured is a private individual and the claim is less than R12,000.00 and the Insurer has given its consent to the insured to effect his own recovery, then yes the small claims court is the cheapest and most efficient way to go although there is no right of appeal.
Note: The amount that may be claimed in the Small Claims Court
* An amount not exceeding R 12 000. (This amount is determined by the Minister from time to time in the Government Gazette. Latest: GG33696, N 985, 27Oct2010).
* If your claim exceeds R 12 000 in value, you can institute a claim for a lesser amount to pursue your case in the Small Claims Court.
Assistance from Insurance Companies
Most of the Insurance Companies will have a legal recoveries department that will do their utmost to recover your excess free of charge. They should immediately initiate the excess recovery process from the guilty party and you will be refunded your excess if the insurer is successful with the recovery.