A car insurance policy is a document containing a pledge by the insurers that they will indemnify the insured, subject to the terms, conditions, and exceptions of the policy, against loss or damage which may be sustained or liability which may be incurred at some future time.
In exchange for his premium, the insured had not received anything tangible; he has been given an ‘intangible’ in the form of a promise to make good his loss if one of the events described in the policy occurs.
Some members of society are reluctant to insure for this very reason because they do not immediately receive anything tangible in return for their premium, however, this reluctance will not protect them from the statutory powers of the Road Traffic Act if driving uninsured.
The Motor Insurer’s ‘product’ in the form of a car insurance policy, therefore, is its promise to indemnify the insured in the event of loss or damage or liability being incurred at some future date and in the same way as with manufacturing and other commercial concerns, it is the insurer’s ability to ‘deliver the goods’ when called upon to do so that will decide whether or not a reputation for good car insurance service, reliability and efficiency will be acquired.
Car Insurance companies are judged by the public for their claims records as much as they are for cheaper or quality cover.
It would be true to say that the efficiency of a claims department will do more to improve the company’s reputation than all the underwriting, marketing, promotion, systems and accounts departments put together.
In simple terms, the claims side of the Car Insurance business produces the ‘acid test’ when the insured sees just what he receives in return for his premium and if he is not satisfied with the ‘product’, only harm can be done.
All too frequently, however, cases have occurred where an insured has not understood the terms of his policy and has blamed his insurers when they failed to meet a claim not covered by the policy.
All car insurance advertisers on this site publish their policies online and we strongly recommend that you read these in detail and telephone the company concerned if there is something in the policy that you do not understand
The Insurance Press is full of articles about the need to improve the standards and communication between the insurers and the insuring public and this is particularly true in the area of claims settlements.
The various methods of handling motor insurance claims and the examination of the mechanism which lies behind the process should be considered if the reason for Claims disputes is to be understood.
What to do following a road traffic accident
The first rule is Don’t Panic! Ensure everyone involved is safe.
Switch off the engines of all vehicles involved.
Activate hazard warning lights and alert oncoming traffic about the accident.
In the event of serious injury or obstruction, call the emergency services on 999 from a landline, or 112 from a mobile.
Remain calm, do not admit liability or offer any form of settlement.
By law, the vehicles should not be moved. However if they are causing a serious hazard to do so, but not until an independent witness has noted their position.
After any form of accident you must, by law, STOP.
Again by law, you must inform the police of the accident within 4 hours if there has been an injury. You are also bound by law to present your motor insurance details to the police within 7 days.
Exchange details with the other parties involved. This will include names and addresses of the drivers and owners of the vehicles, together with registration numbers of the vehicles and insurance details.
Draw a sketch plan of the area, showing the road layout, the position of the vehicles involved, named of surrounding roads, traffic signs, road widths, markings and skid marks.
If your vehicle needs moving, the attending police will arrange this and have it taken to a safe depot or garage. What to do after the accident:
- Ensure that you contact your insurer or insurance broker and inform them immediately of accident.
- Your insurance broker will handle all the arrangements to get your car inspected by an independent assessor.
- If your insurance allows, your insurer will arrange for a replacement vehicle if yours is not road worthy.
- If the accident was not your fault, or any of your passengers were injured, it would be wise to contact a solicitor who will pursue a claim on your behalf.
- Carry a check of this procedure in your vehicle at all times. Ensure you have your insurance brokers details and contact numbers as well as details of your insurer.
DO NOT admit liability even if you have cause to believe the accident was your fault!
DO NOT discuss the details of the accident with others until you have spoken to your car insurance company and a solicitor, as this may invalidate your insurance policy
Making a Claim
Contact your insurer – report the claim and complete a claims form
The Claim form
On completion of the ‘claim form,’ you may well be asked some of the following questions in order for the car insurance company to ascertain the validity of the claim
Typical car insurance claim form questions that may be asked relating to use:
- Please state the exact purpose for which the vehicle was being used at the time of the accident.
- Was it being used solely for social domestic and pleasure purposes?
If the vehicle was being used for business purposes please state:
- Upon whose business was it being used?
- Were goods being carried? If so, state their nature.
- Was the vehicle being used for hire or reward?
- Was the vehicle being used for commercial travelling?
- Were passengers being carried? If so, please state how many and their relationship to the policyholder.
The purpose of all these questions is to ascertain if the vehicle was being used within the terms of the ‘limitations as to use’ or the ‘use warranty’.
If the answer to social, domestic and pleasure question is affirmative there is little need to trouble further; only agricultural policies which have not been extended by endorsement and a few police covering special type vehicles do not cover use for social, domestic and pleasure purposes.
If the vehicle was being used for hire or reward reference should be made to a later question in order to ascertain if the vehicle was being driven by the policyholder or an employee. The answer to the last question is a useful check on the other answers, for if all the passengers were strangers to the policyholder this may indicate possible use for hire.
Typical car insurance claim form questions relating to the driver:
Please state the full name of the driver. If the policyholder, please write ‘policyholder’.
- Please state the driver’s age
- The number of his driver’s licence
- When does it expire?
- Is it a provisional licence?
- How long has he held it?
- Please state all details of all endorsements on his licence
- Has he been involved in any previous accidents?
- If so, please state brief details, giving dates and circumstances
- Was he driving on the policyholder’s order or with his permission?
- Is he a member of the policyholder’s family?
- Is he in the employ of the policyholder?
- If so, for how long?
- Is he or has he been insured in his own name in respect of any other motor vehicle?
- If so, please state the name of the insurers, and, if possible, the number of the policy.
All these questions have to be answered. Very few of them are inapplicable, even if the policyholder was driving. For example, it is curious how often the details are given in the ‘notice of accident form’ of the length of time he has held a license and the number of endorsements differs from the information supplied in the proposal form.
It is important to determine the relationship between the driver and the policyholder. In some instances, the policy conditions require that the driver be a certain person (e.g. the policyholder’s spouse) or one of a certain class of persons. These questions enable the car insurers to confirm that the policy terms and conditions have been observed at that cover was in force during the time of the car accident.
Typical car insurance claim form questions relating to the accident
Please state fully what happened and the exact place of accident, identifying it as closely as possible with some sign or road intersection.
- Date of accident
Was your vehicle on its correct side of the road:
- a) Immediately before the accident
- b) After the accident?
- What was the state of the weather at the time of the accident?
- Was the road surface wet, greasy or icy?
- Was it in a good state of repair?
This question could be important if there is any suggestion that the road had been allowed to deteriorate into a dangerous condition by the local authority and the insurers wish to investigate a possible recovery from the authority on the grounds that the dangerous condition of the road alone was the cause of the accident. The condition of the road might otherwise give some form of indication as to how the accident occurred.
At what time of day did the accident occur?
This question can also be important, for apart from helping the insurers to determine the conditions in which the accident occurred it may also give a lead as to the use to which the vehicle was being put, or even as to the condition of the driver that the time. For example, an accident in the early hours of the morning might suggest that the driver was overtired or returning from a party under the influence of drink, and the insurers would wish to inquire into such circumstances particularly closely.
If after lighting-up time, what lamps were lit on:
- a) Your vehicle?
- b) Any other vehicle involved?
- Was the road lit by streetlamps?
At what speed was your vehicle travelling:
- a) Prior to the accident?
- b) At the moment of collision or impact?
Sketch of accident site
Please draw a sketch plan of the scene of the accident showing the position before and after. Please label each vehicle clearly and, if possible, show approximate measurements of the width of the road, the length of any skid marks and the distance of the point of impact from the curb.
- Was the policyholder in the vehicle at the time of the accident?
- In his opinion, who was to blame?
- To whom and when was the accident reported?
- Did a police officer witness the accident?
- If not, did one subsequently take particulars?
- If so, please state his number and name : Please state the name and, if possible, the address of all witnesses and state whether or not they were a) passengers in your vehicle b) persons hitherto unknown to you
- Please state the name and address of the third party or parties and state what injuries they have sustained or what damage has been done to their property
- If your vehicle has been damaged, please state briefly the nature of the damage and where the vehicle is at present lying.
You will be required to give a declaration similar to the following:
I/We declare that the above particulars are true to the best of my/our knowledge and belief and that these particulars have been supplied to the insurers in order that solicitors, instructed by them on my/our behalf, may conduct any legal proceedings on my/our behalf.’
It is improbable that the details supplied on the claim form will be sufficient if the claim is at all serious, but they, at least, give the insurers a lead. In most instances, the form will be adequate for the insurers to decide on such matters as inspection of the vehicle, liability under the policy or whether a third party claim is likely to arise.
If you are looking for information on how to make a car insurance claim or what to do in the event of a car accident, please visit your particular car insurers website by following any of the links on this site.
Fire, Theft and Accidental Damage Claims
The main objective of a motor claims department is to give the car insurance policyholder satisfaction where reasonably possible with due regard to his wishes concerning repairs, but this does not mean accepting responsibility for repairs not directly connected with an accident.
The negotiation of a satisfactory settlement involves careful checking of repairers’ estimates and accounts, including possibly the workmanship and integrity of repairers not already known to the insurers. It also requires discussion with the policyholder about the work to be carried out and possibly agreement on a contribution from the policyholder towards its cost where improvements to the vehicle (for example, replacement of worn tires) or its performance may result from the repairs. A contribution would be called for if the inspection reveals that some of the damage to the car had occurred before the accident in question, or that corrosion had already taken its toll of the bodywork. If the previously damaged parts are replaced with new ones then the insured will be left, effectively, with a better car than he had before the accident and it is sometimes reasonable to expect a contribution from the insured.
Loss Adjusters and Engineers Inspections
Nearly all claims involving substantial damage to the insured car will be investigated by staff engineers, loss adjusters or independent claims assessors who will also scrutinize where necessary damage, repairers’ estimates and accounts on lesser car insurance claims.
Establishing whether the cover is in force for a claim made under a car insurance policy – drivers
It is necessary to ensure that the vehicle involved is one covered by the policy, but the policyholder need not be the owner (although the question of ownership can be vitally significant). The vehicle may have been lent or hired to him and insured in his name, or it may be a vehicle which he has borrowed and which is covered under the ‘driving other cars’ clause should it be in force on his policy.
In the latter event, it should be ascertained at once that the policyholder was, in fact, driving (because the ‘driving other cars’ extension is personal to the policyholder). The policyholder should be reminded that the ‘driving other cars’ extension does not cover damage to the borrowed vehicle and the owner of the car should be requested to give the name of his own insurers since it is the latter who will now deal with any third party claims that may arise. The driver’s insurers would still, in theory, have to meet any third-party claim under their ‘driving other cars’ extension if, say, the owner of the vehicle held a policy which permitted driving by himself alone.
A further, although comparatively minor, a point arises with regard to the question of the ownership of the vehicle. When completing the original proposal form the insured will have been asked to state whether his vehicle was the subject of a hire-purchase agreement. An affirmative answer may have been given on the proposal form, but when the accident occurs the hire-purchase payments may have been completed.
If there is any difference between the answers given in this respect on the proposal and accident report forms, the insurers would do well to investigate the position and ensure that there is no longer any hire-purchase interests
What is an ‘Insurable Interest’ in the car?
In motor and car insurance an insurable interest in the vehicle may arise in many ways including the following examples:
i) As owner
ii) A hire purchase company has an insurable interest until, on payment of the last installment, the vehicle becomes the property of the purchaser. The hire purchase company is protected by the special provisions of the comprehensive motor policy.
iii) A hirer will be entitled to ensure his third-party liability and, depending on the terms of the hiring agreement, the damage risk. He could ensure the cash deposit he may lose in the event of a claim.
iv) A relative or friend may borrow the vehicle and may insure comprehensively in his own right. It should be noted, however, that if the loan of the vehicle is for a short period only (e.g. for two weeks), the insurers will normally insist that the friend or relative simply be added to the already-existing policy as an additional driver; few insurers would wish to issue a separate short period policy. If, on the other hand, the period of the loan is for, say, a year, it will be recognised that the borrower is in effective control of the vehicle and insurance coverage can normally be arranged in the borrower’s name, subject to the identity of the actual owner being shown in the policy.
Other Insurance Company Interest in the claim
If the driver (even if he is the policyholder) has a policy in force with another insurer, the present insurers are put upon inquiry. The insurers have to satisfy themselves that there is no other insurer interested in the claim, either under an inter-insurer agreement or by way of contribution.
Also, the underwriter may have his suspicions aroused and deem it worthwhile to enquire of the other insurers their experience and terms. It may be that the driver (or the policyholder) has another vehicle insured elsewhere and inquiry may reveal that another insurer has refused to cover the driver (or the policyholder) or has granted cover subject to rigorous terms.
If this background has not previously been disclosed to the present insurers, the latter might argue that there has been a material nondisclosure prejudicial to their interests and in serious cases, they may repudiate liability under their policy.
Denial of Liability under the Policy by the Car Insurers
Occasionally the insurers are faced with a claim where there is no cover eventually in force under the policy.
This may arise in one of three ways:
i) The policy does not indemnify the person claiming, e.g. the policy is restricted to a named driver who was not driving.
ii) The policy does not cover the particular claim, e.g. the vehicle was being used for a purpose not covered by the policy.
iii) The policy does not cover the vehicle, e.g. there has been a change of vehicle without notification.
Under i) there is nothing that the insurers can do. They realize that eventually, they may have to meet a heavy third-party claim as the ‘insurer concerned’ under the M.I.B. domestic agreement if the driver himself has no effective insurance cover.
Under ii) the position is more complicated. If the insurers repudiate liability in respect of the claim they will avoid having to pay the ‘own damage’ claim (if any) and the third party property claim (again, if any).
They may, however, have to pay the Road Traffic Act claim by reason of the avoidance clause, for example, under s.148 of the Road Traffic Act 1972 They are then in the position of dealing with the claim, not as the ‘insurer concerned’ under the M.I.B. agreement, but as the insurer under the policy.
They can, therefore, exercise their rights under condition 2 and the policyholder has to agree to their settlements and to acknowledge their right of recovery from him (see the terms of the avoidance clause).
In practice, this ‘right of recovery’ may prove to be worthless if the insured does not have the means to reimburse the insurers, and if the damages which have been paid to an injured third party, and which are the subject of the recovery action against the insured, are substantial most insurers will conclude that it is pointless to go extra expense with the action and will not pursue the matter if there is little real prospect of a successful recovery from the insured.
The insurers have always to consider their position if they decide to repudiate liability under the policy. There may be a potentially large Road Traffic Act claim, and in certain circumstances, it may be to their advantage to accept the policy as being in force and the deal with the claim accordingly.
If they do this they will (unless the claim is dealt with under the avoidance clause) lose their right of recovery from the policyholder, but they will retain the right to deal with the claim as they think fit. The right of recovery from the policyholder may not be worth anything, but the right to control the negotiations is sometimes worth a great deal.
The position under iii) is equally complicated. It is assumed that the car insurers do not have to deal with the claim under the ‘driving other cars’ extension. Before the advent of the ‘blanket’ certificate, the insurers were entitled to maintain that they were not interested in the claim and could not become interested as the ‘insurer concerned’ because they had not issued a policy which purported to ensure the vehicle. The ‘blanket’ form of certificate now commonly in use relates to:
“Any motor car the property of the policyholder or hired to him under a hire purchase agreement.”
Because of this wording it can be argued that the insurers are in the ‘insurers concerned’; notwithstanding the fact that the insured has failed to notify a change of vehicles: the certificate in the insured’s possession covers ‘any vehicle owned by him…etc’ and whilst the insurers might be able to repudiate any liability in respect of a third party property damage claim or in respect of the insured’s own damage, they would still have to deal with any claim for third-party bodily injury in the terms of the Road Traffic Act. Here again, the car insurers would obtain the insured’s undertaking to reimburse them before they actually make any payments but, as has already been discussed, this right of recovery from the insured could well prove worthless.
Choice of Repairers
To satisfy the policyholder the repairers should usually be a firm of his own choice. Trouble may arise if the insurers insist on employing a particular firm against the policyholder’s wishes.
It is fairly common these days for a car insurance company to have a network of approved repairers throughout the UK and to automatically assign them to a claim via email and EDI. Car Insurance companies are increasingly establishing networks of repairers and garages whose work and charging structures they have pre-approved. If you are involved in an accident, check your policy documents to see whether your insurance company maintains a list of approved repairers. Some companies even have their own repair centers.
When making a claim the insurance company should tell you where to take your car if you need work done, and you will probably not be able to take your vehicle to a garage of your choice.
Don’t worry if you own a new car and are still within the warranty period, most manufacturer garages will inspect the work once it’s been completed and confirm whether it’s up to the correct standard. They will then stamp your warranty card to approve the work.
It is not uncommon for disputes to arise on this point. For example, the insured may have purchased an expensive foreign car from a specialist firm of dealers who added a number of accessories/modifications at the insured’s request at the time of the sale and the insured may genuinely feel that they ‘know’ his car better than anyone else could and that only they, in consequence, should be entrusted with the repairs.
If the repair estimate quoted by that firm is substantially higher than that obtainable elsewhere and the insurers are satisfied that the alternative repairers will perform the work just as well as the ‘specialists’, the only way out of the impasse may be a compromise whereby the insurers agree to have the repairs performed at the garage nominated by the insured, but only on the condition that the insured pays a part of the difference between the two estimates.
The insurer’s main concern is that the repairers should be competent and, where the vehicle is disabled by the accident, that a long distance tow should be avoided. The insurers endeavor to avoid employing repairers with whom they have had previous difficulties, or who consistently overcharge. Although most car insurers have schemes with nominated and approved repairers to whom the vehicle is sent, these schemes can vary considerably.
Repairs by Car Makers and Manufacturers
Occasionally, and especially with high-value cars, the policyholder insists that the makers carry out the repairs. This guarantees the highest class of workmanship, but may not be economical.
Not only are the makers’ charges for repair higher than local costs, but the transit charges must also be added. This method is, therefore, seldom allowed unless repairs are too extensive for satisfactory completion by local repairers, or if the vehicle is of a rare or valuable type.
Alternatively, the vehicle may be an expensive foreign model and the manufacturers may only have a limited number of distribution outlets in the country. The chances are that an ordinary, local, repairer would not be able to perform the work satisfactorily and there may be no alternative for the insurers but to agree to have the vehicle sent to the manufacturer’s distributors for repair.
The occurrences of an accident may occasionally be looked upon by the policyholder as a convenient opportunity for having the vehicle completely overhauled by the manufacturers. If so, the insurers usually agree to bear the makers’ charges for the accidental damage repairs, leaving the policyholder responsible for the remaining charges, including transit to and from the works.
There are specialists who work on a national scale, and others who are to be found in every large town.
Those who work on a national scale specialize in welding and in the repair or replacement of chassis frames, engine blocks, radiators, bumpers and electrical equipment. Their work is of high quality but costs less than the manufacturers themselves would charge.
Local repairers avail themselves of these services, with the result that most large-scale repairs are now carried out in this way. Local firms confine themselves to stripping and reassembling the vehicle and carrying out the minor repairs.
Local specialists perform a useful service as sub-contractors to general repairers. They are employed mainly for coach building and cellulose-spraying, and for making small spare parts which are otherwise unobtainable. Some of the national specialists also have branches in the larger towns, to which work is sent directly by the local repairers.
The choice between using national or local specialist facilities is governed by the plant and equipment which they possess and by how long they will take to do the work. The national specialists are often overloaded with work and time may be saved by using local specialists.
In most cases, the insurer’s engineer/assessor, with his knowledge of repairers and their techniques and their competence, is the person best placed to give advice, both to the insurer and to the insured, on this subject.
The insurer’s option to replace in lieu of repairs or cash payment is seldom exercised. Such a course of action may appear attractive where difficulty has arisen over the amount of a cash settlement, but experience proves that the policyholder nearly always contends that the replacement vehicle is not as good as that which was damaged. If the policyholder can bring evidence to support this contention the Car Insurers may have to make a cash payment as well.
Difficulty in obtaining new parts arises in connection with some foreign vehicles. Insurers are not responsible for any delay which may arise in such circumstances. Serious damage sustained by such a car may lead to a demand by the policyholder for a cash payment. Any payment should not exceed the probable cost of repairs and parts.
Delay over repairs
Some older vehicles are comprehensively insured, and these can give rise to problems in obtaining new or reconditioned spare parts. Engines and other parts for old models may be out of production, with the result that repairers must rely upon salvage dumps and similar sources. The alternative is to have parts specially made, which increases the cost of settling the claim.
Sometimes there is incorporated into the policy an obsolete parts clause. The effect of this is to limit the insurer’s liability for the cost of replacing any part not obtainable from stock to the maker’s last list price, plus the present cost of fitting.
It may be difficult to agree on the pre-accident value of a private car when it becomes a total or constructive total loss.
Values of cars, particularly new cars, may fall fairly sharply, often as much as a third in depreciation and this is not always fully appreciated by the owners.
The policyholder may be asked to produce evidence, such as an engineer’s report, to support his view of the value of the vehicle at the time of loss. Every effort should be made by the car insurance company to reach an agreement with the policyholder, but if this should prove to be impossible the matter would be referred to arbitration in accordance with the policy conditions.
In times of inflation some vehicles may appreciate in value, for example, a car in short supply if obtained at maker’s list price can often be sold for more than was originally paid, similarly it is not uncommon for cars three or four years of age to be sold for little under their cost price due to the increasing cost of the new model.
Replacement cost is, therefore, sometimes difficult to assess and negotiations can be long-winded. The diligent car owner will normally be well-documented on this subject and may have retained garage accounts and the like to prove that his vehicle had been well-maintained, serviced and so on; these documents will normally act as ample evidence to support the insurer’s view of the value of his vehicle at the time of the loss.
There is a total loss when a vehicle has been damaged beyond economic repair (i.e. when the estimated cost or repairing the damage is not much less than, or is equivalent to, the market value of the vehicle).
There may be some difficulty in agreeing to a settlement on the basis of market value at the time of the loss, but this basis must be observed as far as possible (except for agreed value policies) in order to comply with the principle of indemnity.
An indemnity is a cost of replacing the vehicle with one of similar year, model and condition. It is important to appreciate that it is the policyholder’s right to receive replacement cost and not the price he would have received from a private sale or from the motor trade.
Glass’s Guide, a monthly publication containing average car prices for the preceding month, is usually used as an initial indicator of value. Such factors as mileage, condition and additional accessories fitted would be taken into account when negotiating a settlement which could be more or less than Glass’s figure.
Problems sometimes arise when a vehicle is in a particularly good condition or is a special type.
Unfortunately market value seldom accurately reflects low mileage, single ownership, or the money and care lavishing on good maintenance and additional accessories and refinements. The insured may feel that the car is virtually irreplaceable and press strongly for repairs to be carried out, even though the cost may be uneconomic.
In such cases, insurers are generally sympathetic and if a reasonable compromise cannot be reached will sometimes agree to repairs being done subject to the insured making a contribution towards the cost.
It is inevitable that from time to time disputes will arise which may have to be resolved by arbitration.
Constructive Total Losses
A constructive total loss arises when the probable cost of repairs exceeds the market value of the vehicle or the policyholder’s estimate of value, whichever is the less.
Insurers then pay for an actual total loss. In Darbishire v Warran (1963), which concerned a 1951 Lea Francis, it was held that the owner of an old car cannot expect to have it repaired automatically at a cost greater than its market value unless the car is unique and irreplaceable, and that where the car is readily replaceable the measure of damage is the market value.
In other instances of serious damage the insurer’s engineer may recommend repairs, but frequently the policyholder refuses to agree and presses for a cash payment. Often the insurers agree to the policyholder’s request and then dispose of the salvage. Alternatively, the policyholder may arrange with the repairer to accept the repaired vehicle in whole or part exchange for another vehicle immediately and avoid incurring a loss of use costs.
Right to Salvage
The insurer’s right to salvage arises only where the claim payment provides the policyholder with a complete indemnity. In all other circumstances disposal of the salvage is a matter for negotiation.
Insurers usually will have no qualms about taking over the wreckage of a vehicle in order to dispose of is as salvage. Whilst the insurers are taking over the responsibility for the vehicle (a responsibility which can be onerous since the insurers must take every step to prevent the wreckage from becoming a danger or nuisance to the public), they are also acquiring the opportunity to make the maximum possible use of the salvage; most insurers have arrangements for the sale of salvage to dealers or breaker’s yards and will probably be able to obtain more for the wreckage than the insured could independently. The proceeds which the insurers receive from the sale will be set against the cost of the claim paid to the policyholder.
In 1967 the motor insurance industry as a whole entered into an agreement with the Department of the Environment whereby the licensing authorities were informed of ‘insurance write-offs’ and the log books in respect of the destroyed vehicles were returned by insurers to the authorities for cancellation. (The latter was a step designed to prevent the log books falling into the hands of car thieves who might subsequently use the log books on stolen cars, a practice known as ‘ringing’). The effect of the arrangement upon the sums obtained by insurers by the sale of vehicle salvage became immediately apparent: in effect, the sums offered by breakers and scrap merchants for this salvage separated into two levels – the lower amounts applied where the vehicle’s log book was to be marked to show that the vehicle had been written off, whilst the higher amounts applied where the log book was not so marked. Insurers were faced with the dilemma of weighing the public interest against their own private interests: they could obtain much more for a particular item of salvage if the log book were not marked ‘write-off’, but there was a risk that a badly-damaged vehicle would be rebuilt and returned to the road in an unsafe condition. Without doubt and almost certainly without exception, the industry put the public interest first and ensured that logbooks were returned to the authorities suitably marked, but the 1967 agreement ran into difficulties nonetheless; one of the major problems was how to get several hundred motor insurers to apply precisely the same standard in judging whether a particular vehicle was ‘seriously damaged’.
In 1971 the Department of the Environment terminated the arrangement and since then attention has been focused from time to time on the problem as to whether insurers should be required compulsorily to notify the authorities of any vehicle in respect of which a total loss settlement has been paid, regardless of whether or not the log book has been marked. However, the Department of the Environment and the Association of British Insurance did not consider that the problem is serious enough to warrant special regulations and is not nearly as serious as the problem of a large number of vehicles which are put on the road in an unsafe condition through lack of adequate maintenance.
More recently with the establishment of the Claims Underwriting Exchange aka CUE where all car insurance claim data is pooled, and recent initiatives such as the Motor Insurance Database and Car Data history checks online, the problem has reduced.
The policyholder’s impression of the damage suffered by a vehicle may be based largely upon examination of the vehicle before stripping. The removal of badly damaged superficial parts, which may have absorbed much of the impact, frequently indicates that the damage is not as bad as might have been feared. The opposite can also, of course, prove to be the case: the removal of damaged superficial parts may reveal hitherto hidden and serious damage to the vehicle’s chassis or other vital parts, and the cost of repairing the overall damage might be much higher than was originally anticipated.
Where an engineer is employed his report should be made after the vehicle has been stripped, thus enabling him to give a reliable estimate of the cost.
Agreed value car insurance policies
The effect of an agreed-value policy should be appreciated; under such a policy the measure of indemnity is agreed in advance, that is to say at the inception date or renewal date of the policy, rather than at the time of the loss and the principle of indemnity cannot, in consequence, be said to have been breached.
It should be emphasised, however, that settlement of a claim under such a policy is made on the basis of the ‘agreed value’ only when the insured vehicle is a total loss; if the vehicle is being repaired and the insurers are dealing with a claim for those repairs, settlement will be concluded on the usual basis, i.e. subject to inspection and approval by the insurer’s engineer/assessor, etc.