Caveat Emptor: Especially With 'Deportees'

Cedric Stephens, Contributor

Question: I am a 35-year-old woman. I work as the manager /bookkeeper of an auto parts shop. I have held a driver's licence for nine years. I have had no claims during my five-year history of buying motor insurance. I have owned a 2005 Toyota Altis since 2009. This vehicle was insured comprehensively through a broker.

Three months after paying the premium, the broker said that the insurers had concerns about the vehicle's colour. The vehicle was bought from a local dealer and I am the first owner. The valuation report said that the vehicle showed signs of a colour change. A similar statement appeared on the first valuation report. I supplied copies of the customs entry form and receipts, all of which described the colour of the vehicle in the same way it is stated in the valuations. After this, I was told that the insurers would limit the number of persons allowed to drive to two male drivers and me.

Nearly six months after the coverage started, I was informed that I would have to pay another $18,000-plus in premium as the insurers were not "comfortable with my business". I reluctantly paid on the advice of my brokers.

Were the actions of my insurer legal, and will they affect how much premium I will pay in future?

- demona102@hotmail.com.

Helpline: Your insurer's response to my request for information explained what they did but gave very few reasons why they did what they did. Instead of getting into a long conversation with them on the matter, I spoke with an independent, non-insurance company source - call him K. I immediately struck pay dirt. He provided valuable background that helped me to understand why the company "was not comfortable" with the risks that you and your vehicle pose.

I gave K details about the make/model of your vehicle. He asked whether I was aware that employees of a government entity had recently been sacked due to problems with the importation of vehicles. He alleged that irregularities were involved in information that was supplied to the authorities and buyers about the years in which certain vehicles, 'deportees', were said to have been made. The year of manufacture was misrepresented. For example, vehicles that were documented as being made in 2007 were actually manufactured in 2005. As a result, it was quite probable that the estimates of value of those vehicles were overstated. Some importers and most buyers were unaware of the scam. It was suggested that your vehicle probably falls into this group and that your insurers were aware of the racket. Bear these details in mind when you read what your insurers wrote to me.

What Your Insurers Said

" ... The risk was declined on the basis that the type of vehicle is on our decline list as well as (has) irregular vehicle papers. (The vehicle papers state colour (sic) to be brown however on the valuation report it is stated as grey). The broker then appealed the decision to decline the risk and the decision was taken to accept it on the following terms: (a) Toyotas with a sum insured in excess of $1.5 million receives (sic) a 15 per cent discount, however this is not provided to vehicles on our decline list; (b) Cash in lieu and salvage endorsement to be done. (If the vehicle has an accident or is written off the insured has to sign a document saying that they will accept cash in lieu of repairs or keep the salvage) and (c) policy to be restricted. These terms were imposed to improve the underwriting position of the risk.

"Additionally, the broker applied a 40 per cent NCD (no claims discount) when the client was only entitled to 30 per cent ..."

The actions that your insurers have admitted in writing to have taken clearly indicate to me that they hate the vehicle that you bought. I suspect that there are also difficulties in sourcing replacement parts. Your broker is also a big part of the problem. They must have known how the company felt about your car but apparently have not told you so. They also miscalculated the premium. Instead of coming clean, they have hidden behind the "insurers were not comfortable" excuse.

The parties to an insurance contract are not equal. Insurers are, to use words that are common on the streets, the 'shottas'. They fire the shots! These types of agreements are written mainly to protect their interests, not yours. I find it very difficult to criticise their actions based on the information that I have.

Were I in your position, I would sell the vehicle. Replace it with one with fewer issues. This is one way that you could reduce your premium and avoid future problems, especially if you were to have a claim.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel to help you solve a problem write to The Business Editor or contact Mr Stephens directly at aegisja@gmail.com.