QUESTION: I own a 1995 Nissan Bluebird that has been covered comprehensively since I bought it seven years ago. The policy fell due for renewal on November 20. I decided to reduce the value to $300,000 from $380,000 last year. The insurer's representative said I could not do this without a valuation. From my experience, a valuation offers me no security. The amount I will get in the event of a total loss depends on the market value at the time of the accident. Can the company force me to get a valuation?
D.L,
Mandeville P.O.
Manchester
ANSWER: My mother said one cannot be forced to do anything. Like most of the things she told me, this one has also stood the test of time. There are always choices in life. Insurance is no exception. One always has options in one's dealings with insurers. In your case, you can call it quits if you believe your company is being unfair by asking you to spend more money to get a valuation. It is consumers like you that "call the shots" not the 13 companies that insure motor vehicles.
Information is the key to making proper decisions. It is important to know the whys and wherefores about valuations before deciding what to do. The first thing to bear in mind that many of the disputes between consumers and insurers are about value. This covers almost all classes of insurance except life. The exceptions in non-life are those policies where policyholders and insurers agree the values at the start of the contract. These policies say very clearly that the insured values are agreed. How much will be paid in the event of a partial or total loss is stated explicitly. Jewellery, antiques, works of art, ships and airplanes are some of the types of property where agreed value policies are often issued.
The amounts payable under non-agreed value policies are dependent on many things. As you said, valuation or no valuation, the outcome is still uncertain. In the case of a motor policy, loss settlement is based upon a formula in the contract. It reads something like this: "The most we will pay will be the lower of:
the market value of your vehicle or
the amount you insured your vehicle for. We will not pay the cost of any repair or replacement that improves your vehicle beyond the condition it was in before the loss or damage occurred."
Several points are worth noting about the formula.
It does not say that a valuation of the vehicle is compulsory.
it states that payment will not necessarily be based upon the insured value. It will be the lower of "market value" or the amount the vehicle was insured for (estimate of value).
the term "market value" is not defined. This means that the amount to which you are entitled is dependent on the many forces operating in the motor vehicle market generally, and for your type of vehicle in particular.
Motor insurers usually ask for valuations because of all the many variables associated with non-agreed value policies. Valuators are supposed to be experts of motor vehicle market. They are deemed to know, or be familiar with the market prices of all types of vehicles at any given time. The theory behind valuations is that it will be much easier to find out future market prices if the present market prices are known. Recent scandals in the corporate world and the disappearance of billions dollars of value suggest that skepticism about insurance and other valuations is healthy.
Your insurer cannot force you to value your car. I believe that they are simply suggesting that it would be in your interest to do so. Ultimately, it is your decision whether you accept that recommendation. If they refuse to accept the value you have placed upon it find another insurer. After all, this is a free market.
Cedric E. Stephens provides advice on risks and insurance. If you need free information or advice, write to the Financial Editor or contact Mr. Stephens directly at aegis@cwjamaica.com
