What determines the premium of my motor insurance policy?
The cost and availability of motor insurance cover will be greatly influenced by:
- The level of insurance cover
If you are opting for a comprehensive cover be prepared that you are going to pay more than if you opt for a third-party only cover.
- The type of vehicle
If you require cover beyond Third Party Only, the state and age of your vehicle are important as they will affect the availability of spare parts and the level of repair costs. A powerful, expensive vehicle will cost more in terms of spare parts and repairs.
- The age of the driver/s
Information about drivers affects the premium significantly. The insurer will require details not only regarding your age but also regarding the age of any person you allow driving your car. The younger you or any driver are, the higher the premium will be. Statistics and experience have shown that mature drivers have fewer accidents than young inexperienced drivers below the age of 25. Restricting the number of drivers on your car may result in a discounted premium.
- Your “No Claims Discount” (NCD)
If you have a full NCD, your premium will be reduced considerably.
- Your past accident record
A clean driving record will obviously result in a lower premium than that for a person with a record of accidents or serious traffic violations. Past claims may also influence the premium charged.
- The nature of use of the car
Social, domestic and pleasure purposes, business purposes, commercial purposes, car hire, etc. Furthermore, if you install a car alarm, you may be entitled to a reduction in your premium.
- Insuring more than one vehicle
You may be entitled for a discount on your premium if you insure more than one car with the same insurance company.
Which extra charges would I incur should I decide to change my insurance cover?
Apart from the additional payment to compensate the increase in premium, the insured would be liable for payment of document duty which is payable to the Commissioner of Inland Revenue.
When your policy is up for renewal, shop around for alternative covers with other insurance covers. Do your homework well before you renew. If you renew your policy with the same insurance company and then find another company (which may offer you cheaper insurance, for example), you may be able to claim back the document duty you had paid from the Commissioner of Inland Revenue (your insurer is unable to refund document duty). If you decide to switch after you have already renewed your policy, you have to pay the document duty again.
You might not be able or entitled to receive a full refund of any premium you had paid.
If you are entitled to receive a refund of premium, it is likely that such refund is not calculated on a pro-rata basis. Insurers normally apply stepped rates (known as “short period rates”) when calculating refunds – your policy would generally include a section about refunds of premium and how they are calculated.
How do I decide on the value of my vehicle?
It is YOUR responsibility to establish a reasonable market value for your vehicle. The market value should not be mixed up with the value you would have been willing to sell your car for (and for which you might have found a buyer). If you disagree with the market value, it may be appropriate to obtain an opinion from a qualified motor surveyor (your own insurer should be able to suggest one) to ascertain an independent view.
The insurance company or insurance intermediary will be able to guide you on the basis of a Motor Vehicle Values Guidebook published annually by the Malta Insurance Association (MIA).
This value will serve as a guide for the market value of your car and hence the value referred to in the event of a claim. You should change the value of your vehicle at each renewal unless you have Third Party Only cover (where the premium is not based on the value of your vehicle). It is your responsibility to do so – not the insurance company’s.
Each time you revalue your vehicle (usually downwards), your insurance premium will also reduce unless you already pay the minimum premium, which differs between insurers. Once the premium applicable to the market value reaches minimum level, further reductions in value will not reduce the premium.
You should ask your insurance company about the minimum premium.
When you receive your renewal notice, ask your insurer or insurance intermediary for the revised value on the most recent published guide. Check carefully when the last report had been published. If the value suggested to you is based on a report which had been issued more than three months from the date of your renewal, the value might need not be realistic.
In fact, if you disagree with the value on the guidebook, don’t attempt to come up with a value yourself!
You may consider contacting a qualified surveyor to value your car on an annual basis., The surveyor would prepare a valuation which you could then present to your insurer or insurance intermediary prior to renewal.
You should always ask a surveyor to prepare a valuation where the vehicle is a rare or unique model, has a very low mileage, is in a showroom condition or has many non-standard extras.,
Keep in mind that a valuation does not have a “validity period” and, for the purposes of compensation, the value of the vehicle is the market value at the time of the accident.
Your insurance company would not cover you for any expense you incur for appointing the surveyor If the value suggested by the surveyor is higher than that in the guidebook, double-check with the surveyor. You might end up paying a higher premium for nothing. Also remember that a valuation will only accurately show the value of the vehicle at that particular moment in time. Changes in the market that occur afterwards (such as an introduction of a new model or a change in the registration tax) may result in that value being no longer accurate.
If you keep the value of your vehicle at an amount higher than the guide indicates, the insurer will still pay your claim on the basis of the market value, not on the higher amount you declared on your insurance policy.
The guide shows the values of vehicles on the basis of certain assumptions particularly those regarding the condition of the vehicle. The value of your vehicle is subject to constant changes throughout the year and will be affected by various factors some of which are the mileage, the level of care and maintenance exercised by the owner, the supply and demand for the particular vehicle and the particular model and specifications.
The issue of having the correct valuation of a vehicle assumes its importance also in the case where following an accident the vehicle is damaged “beyond economic repair”. In such a case, the insurer would determine that the repair costs are so excessive that the vehicle becomes “beyond economic repair”. For example, depending on the vehicle’s condition, some insurers may apply a threshold of 60% on the vehicle’s market value to determine whether to repair or not. Usually the insurer informs the claimant about this and will make an offer – either as cash settlement for the market value of the vehicle or alternatively, the insurer will obtain a realistic and valid value for the wreck and will pay the difference in cash.
If you claim under your policy, the liability of an insurance company in your regard is limited to the reasonable market value of the motor vehicle immediately prior to the loss or damage (referred to as the pre-accident value) but limited to the estimate of value you declared at last renewal. Therefore, the insurance company may not necessarily pay the same amount as the market value set at last renewal if you under-valued your car.
Moreover, if your claim is paid by the third party’s insurance company (which has admitted liability), such company is not even obliged to refer to the value declared at last renewals as there is no contract between you and this insurer. However, it may choose to be guided by the value which was established by a qualified surveyor at last renewal.
Whichever way a claim is made, an insurer is duty bound to indemnify you – this means putting you back into the same financial position you were in prior to the accident. Through its appointed surveyor, a market value of the damaged vehicle would be established – this is normally referred to as the pre-accident value and is shown on the surveyor’s report. If you disagree with the market value, it may be appropriate to obtain an opinion from another surveyor (perhaps your own insurer may suggest one) to ascertain an independent view. Ultimately you would need to have in hand professional evidence that the pre-accident value of the vehicle was higher than that determined by the insurer.
What is a ‘No Claims Discount’ (NCD)?
Motor insurance is renewable yearly. The No Claims Discount is the reward you are given for not claiming on the policy for the past 12 months. Scales do vary but usually range from 20% for one claim free year up to 65% or more after four or five years. This discount is not lost if you change your vehicle or your insurer. You cannot transfer your discount to third parties, the only exception being your wife/husband.
If you choose to change your insurer, the new insurer will need to obtain written confirmation from your previous insurer regarding the No Claims Discount (NCD) you are entitled to. There are various discount schemes offered such as Protected No Claims Discount or Careful Drivers Discount. Ask your insurer or insurance intermediary for details of these discounts.
What are the factors that provide for eligibility for the transferability of the No Claims Discount (NCD)? What happens in those scenarios involving husband/wife; father, mother/son or daughter? Do insurers allow transfer of NCD to third parties?
The general rule is that the No Claims Discount is not transferable. It is earned by an individual only if he/she has held an insurance policy in his/her name and has not registered any claims in the period.
There are exceptions to the above – from a legal perspective one should note that since the NCD is a form of intellectual property, it falls under the property acquired during the marriage and thus is owned jointly by both spouses and hence attributes to the concept of the “community of acquests”. It is thus possible to transfer NCD earned by one spouse to another.
However, the NCD is not transferable from one person to another in any other circumstance. It is of course possible for an individual to transfer NCD from one policy to another and one insurer to another, even if these are in different countries. The percentage of NCD that is transferred will vary according to each insurer’s rules and practices.
When transferring from another insurer, the general rule is that insurers will allow the NCD that the person would have earned had he/she been insured with them during the period he/she had been insured with the other insurer. It is normal for an insurer to verify the NCD entitlement with the previous insurer.
Typically in those scenarios where a policy upon which NCD has been earned is left to lapse, most insurers will be willing to transfer that NCD to a new policy, as long as no more than 24 months have elapsed between the lapse date and the inception date (of the new policy).
Insurers do recognise that the NCD system prejudices those who are purchasing insurance for the first time and thus have no driving record, and those who have a good driving record but under a policy issued in someone else’s name. In such circumstances, some insurers allow “initial” or “starter” discounts. These are not however considered as NCD and usually apply only to the first year of insurance, after which the normal NCD system starts to apply.
Will I lose my No Claims Discount when I claim?
In the case where you make a claim and you have the minimum Third Party Only cover, you will lose your No Claims Discount (NCD). On the other hand, if you have a higher level of cover such as Third Party Fire & Theft or Comprehensive Cover, then you will only lose part of your NCD if you make one claim. The reason is that nowadays, most insurers offer a “step-back” scale. Normally your NCD will step back by two years instead of going back to zero.
Not all insurance companies apply the same methodology for the “step-back” of the NCD. Your policy document should clearly indicate how the insurance company will calculate the NCD in the event of a claim.
Some companies offer the option to “protect” your NCD for the payment of an additional premium. This means you will not lose your current NCD if you make just one claim. Check with your insurance company whether you benefit from NCD Protection cover.
Will I still lose my No Claims Discount if I am not to blame for an accident?
NCD is automatically lost when you make a claim, irrespective of, whether are to blame or not. However, if the insurers of the third party admit the blame and agree to compensate you, your NCD will be restored when your insurer recovers all the amounts they have paid for your repairs from such third party insurers. Your excess will also be refunded. Any refunds due to you will not be forfeited if you change your insurance company
Would I be entitled to receive a refund of premium if I reach the age of 25?
Generally speaking, the annual premium is revised on renewal taking into account facts such as vehicle use, drivers’ ages and claims experience, which could change during the preceding year.
Insurers would normally apply additional premium (usually referred to as “loading”) on the basic premium for drivers between 18 and 24 years. Loadings charged by the market vary from company to company. Some companies may also make a distinction between loadings where the young driver is the principal driver and when the young driver is an additional named driver.
When a driver celebrates his 25th birthday, this “loading” is removed. It is not only the additional premium which is affected. Many insurers would also, for example, reduce the excess which may be payable in the event of a claim. In effect, this means that the policy may need to be amended (some policies have automatic provisions for this) and an endorsement with the relevant changes may need to be issued.
Some insurers may, on renewal, be in a position to calculate the exact annual premium due taking account of the period when the loading is no longer applicable and without the need for the policyholder to ask for the refund. Not all insurers offer this arrangement, however.
For example, some insurers would advise that, as soon as the principal driver or any of the additional named drivers under a motor policy turns 25, the former (i.e. the principal driver) would be required to submit a request to the insurer for a pro rate refund of the premium. Such request may be done in writing and some insurers may also ask for a copy of the identity card of the 25 year old driver. In the process, the insurer would also issue an endorsement to the policy.
Some insurers would insist that the request for a refund is made by the main policyholder, rather than the additional named driver, even if it is the latter who has reached the age of 25. This is because the contract is between the insurer and the policyholder and not between the insurer and the main driver of the insured vehicle.
No refunds would usually be accepted when the policy does not name the drivers (in this instance, the policy would allow any driver over 25 years to drive the vehicle and by default, drivers under 25 years would not be covered under the policy).
Some insurers would not normally accept a request for back-dated pro rate refunds. For example, a policyholder who informs his insurer, say, two months after his turning 25 years of age, cannot expect the refund to be so backdated.
Insurers are unable to give a refund on stamp duty in the event of a refund on premium. More information about this aspect may be obtained from the insurance companies or the Commissioner of Inland Revenue.
Lastly, it is important to shop around for the policy which best suits one’s needs. A policyholder may also seek the services of an insurance broker who would be able to provide advice about the various insurance policies available on the market. It is also important for the policyholder to ask for a written quotation prior to renewal, and to inform an insurance company about any changes which might occur during the period of insurance.
If I decide to drive my car abroad, would my insurance policy cover me for any accidents which may occur in a third country?
All motor policies automatically provide third party cover if you drive your vehicle in any EU and EEA country. This means that, if you drive your car anywhere in the EU and EEA, your insurance policy will cover you for any injuries or damages to third parties at no additional expense. Always keep in mind however that an insurer expects you to use the car predominantly in Malta and only for short trips abroad. If you will be spending considerable periods of time abroad then this is a material fact that you are obliged to reveal to your insurer. Some insurers may not be willing to insure your car if it is not normally based in Malta.
If you have a third party fire and theft or fully comprehensive insurance policy, such cover would not be automatically extended if you are driving abroad. If you wish to have such additional cover while driving abroad, you would need to pay additional premium to your insurance company.
You should check with your insurance company about the extent and type of cover your policy extends when driving your vehicle in the EU and EEA. You should enquire about extending your vehicle breakdown and recovery service to those countries which you shall be visiting. This will come in handy if you happen to need roadside assistance or recovery at a local garage and it might also include alternative transport.
You should always check if you need a Green Card prior to your departure.
The Green Card is an international third party motor insurance system based on the Uniform Agreement between Bureaux and the Multilateral Guarantee Agreement and such other agreement which may come into force from time to time. If you are driving in a country outside the European Union, you will certainly need a Green Card.
If you are travelling with your car throughout the European Union, you do not need a Green Card. Instead you will need your certificate of insurance, your driving licence and your log book. Some insurance companies, however, may issue a Green Card free of charge to their policyholders. A Green Card will however facilitate matters for you if you are involved in an accident as it is an internationally recognised document.
You will also need a European Accident Statement Form that you will need to fill if you are involved in an accident. Your insurer should provide you with this prior to your departure.
Remember to ask your insurer for information if you are involved in a traffic accident while abroad. An insurance company is obliged by law to have a claims representative in each EU member state. The claims representative has a duty to handle claims against you from third parties in the country which you are visiting but should also be able to assist you with any damage you suffer abroad. Always contact your insurer in Malta immediately you have an accident abroad so that they can provide you with the necessary guidance.
Remember to ask information about the insurer of the third party if you are involved in a traffic accident while abroad. All insurers are required to identify and appoint a Nominated Representative (also known as Nominated Correspondent) in each other Member State of the European Economic Area (EEA). This enables you to make a claim in your own country of domicile should you have been involved in an accident whilst travelling in another country of the EEA.
The representative of the foreign insurer is required to hold the necessary authority to handle and settle claims after having collated all the relevant information about the accident and negotiated an equitable settlement.
In cases where liability is not contested and the compensation claimed has been quantified, the Nominated Representative is required to make a reasoned offer for compensation by not later than three months from the date when the claimant submits a compensation claim.
In cases where liability is declined, the Nominated Representative is required to provide a reasoned justification for such declinature within the same timeframe.
You may identify the name of a nominated representative by making an enquiry with the Information Centre by telephone +356 25608136 / 2560814, facsimile +356 25608167 or email [email protected]. The Information Centre will be able to inform you about the insurance status of a foreign vehicle and the insurer’s representative in Malta.
How does an insurance company deal with the transfer of a vehicle?
You may decide to transfer your car by selling it. However keep in mind that your insurance company is responsible for all the claims until the transfer is officialised and formalised with Transport Malta. Once requested to do so, the insurance company must terminate the insurance policy and must inform Transport Malta of such change. Normally an insurer is unable to cancel a policy unless you present proof that the transfer has been effected, such as a copy of the logbook showing the new owner. If you fail to notify your insurance company prior to transfer of your vehicle to third parties, your insurance company may possibly refuse to pay any claim if they occur after the transfer to third parties had been made.
What other discounts can I get?
Most insurance companies may offer additional discounts if:
- you limit the authorised drivers;
- you choose to increase the excess;
- you insure more than one vehicle;
- you have an approved car alarm installed in your vehicle; and/or
- you also have a household insurance with the same insurer.
