What should I keep in mind when purchasing travel insurance?

What should I keep in mind when purchasing travel insurance?

• The purpose for which you are travelling. Are you going on holiday or is it a business trip? Does your holiday involve activities such as rock-climbing or sporting activities such as skiing? This is all information which you must disclose in order to be able to ensure that you are covered for any possible losses or injuries you might suffer in participating in such activities. You might be required to pay a higher premium in such instances. If you are attending a particular event as part of a group such as a sport tournament, it might be best to organise a group policy specifically for the event.
• The kind of medical treatment to which you will be entitled if you suffer an injury or illness whilst travelling. Remember to ask about emergency and rescue services particularly if you intend to visit remote areas and whether there are any thresholds to refunds. Think of the least expected possibility such as a toothache! Remember that there is no cover for treatment of any pre-existing medical condition such as any chronic illness like asthma or diabetes. Enquire what happens if you have to stay longer or less than your intended holiday period due to illness.
• You will be required to sign a health warranty stating that you are not suffering from any serious or chronic illness or receiving or awaiting to start medical treatment for any condition. Read it well before signing. Any misrepresentation or failure to disclose any condition will render your insurance void.
• Ask what costs are covered in the unfortunate event of death. Enquire what cover you have for repatriation and burial costs.
• Whether you will need cover for valuables. This term includes items such as jewellery, watches, photographic equipment and sports equipment amongst others. Assess whether you will need to take such items with you and make sure the limit on your insurance policy is enough. There may be a limit for each item and a maximum limit. So take the time to check the value of the items you and any other travelling companions will be carrying. Remember you must keep these items in your hand-luggage and not in an unaccompanied suitcase whilst travelling. Most travel policies define what is considered as valuable item.
• Check on the possibility of covering cash and travellers cheques. Some policies do not give this cover when travelling in certain territories. Remember you will be expected to take good care of your cash while travelling and it is always advisable to keep the cash level to a minimum. Check what rates of exchange will be used in the event of a loss.
• Make sure you understand the cancellation and curtailment cover given under the travel policy. The policy will list specific circumstances which may cause you to cancel or curtail your journey and which are covered. Only in these instances will the policy refund you any non-refundable deposits you had paid in advance. Remember the cover under this section will start from the date you purchase the travel policy and that it is therefore important to take out the insurance policy as soon as you pay any deposit to the travel agent/airline/hotel.
• Enquire what excesses apply to the different sections of your policy. If you have two unrelated claims, two different excesses may apply.
• Are you adequately covered? Ask your insurer to guide you select appropriate cover for the value of your property – the amount insured. Many insurance policies would normally include a condition in your policy (usually under personal belongings) whereby if at the time of any loss or damage your amount insured is inadequate, the amount you may recover will be a proportion of the amount insured to the value of your property at the time of the loss or damage. This means that if you claim for more than you are insured, you are most likely to get a lower amount by way of proportion.

So don’t organise all your travelling arrangements and leave the insurance as an afterthought!

What is excluded in a travel insurance policy?

What is excluded in a travel insurance policy?

Carefully check all the exclusions before you decide on a travel insurance policy. They should be clearly identified in the policy document.  In many travel policies loss or damages suffered in the following circumstances are often excluded:

• You have a pre-existing medical condition which is not advised to the insurer or you travel against medical advice. This exclusion may also apply for any members of your household or any persons with whom you intend to travel or stay.
• You join in “adventure”, “danger sports” or other hazardous activities. “Adventure” activities often include bungee jumping, white water rafting, ballooning, snow skiing and scuba diving.
• You leave your luggage “unattended” in a “public place” and it is lost or stolen.
• Your valuable items such as cameras, sound equipment or mobiles are lost or stolen when left “unattended” in a motor vehicle or put in unaccompanied baggage.
• You exceed the age limit. Some insurance companies will not insure you if you are over a certain age.
• You cancel plans because of a change in your financial circumstances or business obligations

When is cancellation covered under your policy?

Make sure to check what coverage you have under the policy before you actually sign (unless this is offered as an added benefit to a specific debit or credit card). Pay particular attention to when cancellation under your policy is covered and when this is excluded. Don’t assume that your policy covers you for any eventuality that leads to cancellation of your trip. Below we describe typical cancellation scenarios that are covered or excluded under a travel insurance policy.

What may be covered:

• Accidental bodily injury to or illness or death of the insured person, any immediate relative, close business colleague or any person with whom the insured person has arranged to travel;
• You or your travelling companion being summoned for jury service or called as a witness in a Court of Law during the period of insurance;
• Your home becomes uninhabitable following a fire, storm or flood.

What may be excluded:

• Withdrawal from service temporarily or permanently of any ship or aircraft on the orders or recommendations of any port authority or the civil aviation authority or any similar body in any country;
• Pre-existing medical condition or travelling against medical advice;
• The insured person or travelling companion is not inclined to travel, suffering from anxiety or are in financial difficulty.

Some policies may offer additional cover for cancellation as a result of adverse weather conditions. Check with your insurer about such cover and the applicable limits and conditions. Always keep an eye for specific exclusions under a travel insurance policy, such as one-way journeys, winter and extreme sports (unless the last two exclusions are specifically catered for under the policy). Other common exclusions are unattended personal effects (such as luggage), valuables and money.

If luggage is lost or damaged while in the care of a transport company, authority or hotel you must immediately write to them and give details of the loss or damage. If the luggage is lost or damaged by an airline you must obtain a property irregularity report from the airline desk and keep the damaged items, travel tickets and tags as you will need these to file a claim under your travel policy. Insurance companies may also require a written police report when personal belongings are lost or stolen and normally this has to be obtained within 24 hours of discovering the loss. The insured person must provide the insurer, at his/her own expense, with all the detailed particulars and evidence relating to the cause and the amount of the loss, damage or expense.

The extension of cover will depend on the type of policy chosen; the one with the lesser cover (basic policy) will obviously be the less expensive. Insurance companies will usually not make good for the whole amount of the claim and the policy holder will have to bear a part of the cost of a claim himself. This is known as the excess. The amount of excess will vary between insurance companies and even between insurance policies, with the basic policy usually having the highest excess.

There are time limits during which a travel insurance policy will be considered as valid. The period of insurance under the cancellation section starts from the date the schedule is issued and ends when you begin your holiday or journey. The period of insurance for all other sections starts when you leave your home or workplace and ends when you return home from your holiday or journey. Cover applies for the number of days shown on the schedule (which might vary from 3 to 6 months)

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.

Insurance Undertakings Issuing the Policy

Certain insurance companies also distribute their products directly to clients.  Accordingly, it is possible to purchase an insurance policy from the insurance company issuing the product itself.  Such companies are required to abide by the relevant provisions in the Conduct of Business Rulebook which apply to persons who distribute insurance products, which mainly transpose the requirements of the Insurance Distribution Directive.  This means that even when purchasing a policy directly from the insurance company issuing it, the latter is bound to make certain disclosures to the client and to ensure that it acts in the best interest of the client.

Introducer

An introducer is a person or company that enters into an agreement with an insurer, an insurance agent or an insurance broker so that he introduces clients. This individual is not licensed by the MFSA and may only introduce you to the insurer/agent /broker that he is tied to. An introducer is not permitted to give advice to prospective clients, or give or collect documentation or any money from clients. This intermediary may only offer to give you a contact with an insurer, broker or agent i.e. he will normally provide your contact details to the insurer, broker or agent and they will do the rest.

Intermediaries

Intermediaries

An intermediary is an individual person or a company who brings together prospective clients and insurance companies for the purpose of issuing an insurance policy.

There are five types of intermediaries that offer a direct service to clients in the insurance market. These are:

• Introducer
• Ancillary Insurance Intermediary (AII)
• Tied Insurance Intermediary (TII)
• Insurance Agent
• Insurance Broker

All intermediaries, except for introducers, are licensed by the MFSA and regulated under the Insurance Distribution Act and the Rules issued thereunder. The introducer, TII, the AII and Insurance Agent are dependent insurance intermediaries because they are acting under an agreement with specific insurers but an Insurance Broker is independent.

Tied Insurance Intermediary (TII)

The TII was previously known as a sub-agent or a salesman. This intermediary is appointed by one or more insurers but for different classes of insurance. This means a TII should not offer you a motor policy of two different insurers but he may offer you a motor policy of one insurer and a household policy of another insurer. The TII is licensed by the MFSA and is permitted to assess the insurance demands and needs of prospective clients  and assist them in the completion of proposal forms and will normally deliver policy documents to the client and collect the premium from the client. The TII cannot accept the risk on behalf of the insurer. Only the insurer can decide whether the risk is acceptable or not and at what premium. The TII should always identify himself to the clients and inform the client of the identity of the insurer he is tied to. Moreover, if the TII collects money from the client, he should give the client a receipt immediately. This receipt should show the enrolment number of the TII, his name, address/identity card number and a reference to the policy in respect of which premium is being paid. Above all the receipt should show full details of the amount paid but not as one amount. It should show the premium separately from the relevant document duty and any fees charged by the insurer or the TII for the service. The fee charged by the insurer is normally a policy fee which is a charge for the cost of issuing the policy document. This fee may vary from one insurer to another. The client should always make sure he is aware of the name of the TII and his business address, the name of the insurer and the address of the insurer.

The TII may also be tied to the insurer through an insurance agent. This means that he will introduce the client to an agent of an insurer instead of directly to the insurer. In these cases the client should make sure he also knows the name of the agency and the relevant address. These details are important if the client requires any additional information at a later date or in the event of a claim. Should there be a claim, the TII may assist the client to obtain a Claim Form and deliver it to the insurer or the insurance agent. However the claim is then handled directly by the insurer or agent. The TII may also collect the excess relating to the claim and pass it on to insurers. Again a receipt should be provided for this excess. Once the claim is agreed, if there is a settlement due to the insured, the insurer may send the settlement, payable to the insured, with the TII. Otherwise the settlement is given directly to the client.

It is important to note that a TII is not permitted to introduce business to insurance brokers. TIIs may also be appointed by EU companies, i.e. companies that are authorised in another EU territory. So make sure you understand who the insurer is and where he is authorised. If the insurer is not authorised in Malta, he will not be regulated by the MFSA and in the case of insolvency of this insurer, there will be no compensation offered under the local Protection and Compensation Fund.

Sometimes banks offer insurance policies too. The bank is acting as a TII when it does so and is tied to an insurer or insurers. The banks may only introduce life policies and premium payment protection policies. Always make sure you know who the insurer is. In the case of life insurance policies and payment protection policies purchased for loan purposes, the bank must clearly explain that you may purchase such policies from other insurance companies that also satisfy the bank’s requirements and that you are free to choose from where to purchase your policy. In fact the bank should exhibit a notice that states this on the counters where you are served. You should also be given a copy of this notice for you to sign in acknowledgement.

Insurance Agent

An insurance agent is a professional that is tied to one or more insurers, even in the same classes of business. Therefore you may find insurance agents who are able to offer your two home policies of two different insurers, or two motor policies of two different insurers, after assessing your demands and needs. However most agents are only tied to one insurer. The insurer may be a locally authorised insurer or a foreign insurer who is authorised in an EU or non-EU territory. An insurance agent enters into an agreement with one or more insurers and is given the authority by that insurer to underwrite business on its behalf. Therefore an insurance agent may offer you policies in different classes of business that are issued by its principal/s, i.e. the insurer. The agent may decide to accept or refuse the risk on behalf of the insurer and issues the policy documents as well. Always make sure you have understood clearly who the insurer is. The agent is also authorised to collect premiums and also handles claims until settlement. All the activities of the agent are governed by the agency agreement between the agent and the principal and will vary from one insurer to another. The agent may give you advice on the product and cover chosen and should provide you with a receipt on collection of monies. This too should give details of the premium separately from the document duty and any fees charged by the insurer and by the agent.

Insurance Broker

The insurance broker is the only independent intermediary who may offer you the products of any insurer in the market. A broker is bound by Conduct of Business Rules issued by the MFSA its Conduct of Business Rulebook . The broker should be objective in his advice and should provide you with alternative quotations (at least three or four) so that you may choose the product best suited to your needs. Do not limit your choice to the price. There are other important aspects to consider, such as the claims handling service of the insurer. The broker will perform the preparatory work such as assisting you to complete a proposal form and get you different quotations from different insurers. The broker should assess your insurance demands and needs and act with complete freedom and inform you of the advantages of one policy over another, clearly identifying the relevant insurer. The insurer will issue the policy documents and send them to the broker who should check them to make sure they are in line with your negotiations. Once satisfied, the broker will forward the policy documents to you. The broker is also authorised to collect insurance monies and should also provide you with a receipt showing the premium separately from the document duty and any fees charged by the insurer and by the broker. In the unfortunate event of a claim, the broker should also assist you in the completion of a claim form and liaison with the insurer until settlement of a claim. Settlement may be channelled through the broker but the insurer may sometimes choose to settle directly to clients.

There are certain situations where the broker does not act with complete freedom in choosing the insurer. These are as follows:

1. In some instances brokers may enter into what is called an underwriting agreement with an insurer for particular classes of business. This means that the insurer would allow the broker to accept risks on its behalf under that agreement for that specific class of business. In that case the broker would be able to issue the policy documents for those risks itself. This happens mostly with motor and travel insurance. If your broker accepts your risk under such an agreement, the broker is duty bound to inform you that he is placing your risk under an underwriting agreement with that specific insurer.
2. The broker may also have a computer link arrangement with certain insurers. This means that he enters into an agreement with certain insurers for certain classes of business and will have a specific computer arrangement with the insurer to accept those risks and issue the policy documentation immediately from the system. This too is very common for motor and travel policies. Again, if the broker places your risk under such a computer link arrangement, he should inform you of this.

It should be noted that a broker may also introduce you to insurance companies that are not locally authorised. These may be companies registered in the EU or in any non-EU territory. In such instances the broker should explain clearly who the insurer is and that it is not regulated by the MFSA and in the event of insolvency would not be covered by the Protection and Compensation Fund. The broker also needs to explain possible difficulties that may be encountered in the event of a claim if there is no local representative. Moreover the policy may not be subject to Maltese law and you may not have the right to choose the applicable law. Therefore it is important that you ask questions and ensure you understand the implications. The language of the policy may also be an issue. If the insurer is in a non-EU territory check carefully where it operates and ask whether it is regulated in any way.

An insurance broker may also offer to place your business with Lloyd’s. In this case the broker should explain particular issues regarding Lloyds as regards its Central Fund, the Lloyds syndicates and possible compensation under the Protection and Compensation Fund amongst others. The client should be informed of the local Lloyd’s representative and the exact Lloyd’s syndicates that are insuring his risk.

Ancillary Insurance Intermediary

An Ancillary Insurance Intermediaries (AIIs) is a person whose main activity is not insurance distribution but who, for remuneration, on an ancillary basis, distributes insurance products which are complementary to a good or a service. The AII can only distribute products covering life assurance or liability risks, only if that cover complements the good or the service which the AII provides as its principal professional activity. An AII cannot be a credit institution or an investment firm.

AIIs may be appointed by insurance companies, insurance agents or by insurance brokers subject to certain restrictions with respect to the classes which they may distribute and must enrolled with the MFSA. The AII acts under the full responsibility of the insurance company or of the insurance broker which appoints them.

With respect to non-life insurance, an AII may be appointed by two separate insurance companies on condition that the products offered are different. Accordingly, for example, an AII may not offer the home policy of two different insurers. An AII may only be appointed by one insurance company or agent for the distribution of long term business such as life insurance products.

When an AII is appointed by a broker, such appointment may only relate to non-life business and may only be made in the context of one particular product.