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Why no-fault isn’t always a no-cost claim - motor insurance jargon explained

Mon 21st Jan 19

The insurance industry is not generally known for its straightforward wordings, with many technical terms that appear to have come straight out of the Victorian era…or maybe even further back into history. While things have certainly moved forward a lot in most recent times, we still have a long way to go to becoming straight talking.

This was brought into focus this week when BBC’s Money Box discussed ‘The cost of a no-fault accident’. The programme highlighted that more and more people are finding that, even if they have disclosed motoring incidents that were indisputably not their own fault, at renewal their premiums have risen considerably as a result.

Paul Lewis, together with reporter Dan Whitworth, took a look at fault versus no-fault claims, what they mean, and why sometimes a no-fault claim can cost a policyholder more in the long term.

Always keen to make things easier for our policyholders and the wider world, our team decided to take a look at some motor insurance claims jargon, to pick it apart and make better sense of it…

Better explaining fault versus no-fault claims

There really are only two types of claims when it comes to motor incidents – those when the policyholder is at fault and those when the incident is caused by someone else (the third party). In that respect, the insurance industry has it spot on.

We stray from the straightforward, though, when an insurer pays out to a policyholder for a claim that’s not their fault, with a view to recouping that pay out from the third party who caused the damage. This is called ‘subrogation’.

As Money Box explained, if the insurer can recoup that money, the claim is closed and the policyholder’s premiums remain, on the whole, unaffected. If the insurer can’t reclaim the money, though, the next year’s premium is likely to rise. This can be caused by a number of scenarios, including:                              

·      If an accident was caused by a third party and their insurer is disputing the claim

·      If the accident was caused by someone without the appropriate cover (an uninsured driver)

·      If the accident was a hit and run or the person responsible has not left their details or registration number

·      If the damage was not caused by a person at all

So, in the case of the Money Box example, in which damage was caused by hail – an extreme weather event – there was no way for the policyholder’s insurance company to recoup the money they paid out for the claim and it therefore affected the following year’s premium.

In this respect, instead of two, there are three types of claim:

·      Fault claims where the policyholder has caused the incident and therefore expects their premium to be affected

·      Absolutely no-fault claims where the damage to a policyholder’s car or property was caused by someone else and that person’s insurance company has paid out to cover the costs of repair or replacement

·      Irrecoverable no-fault claims where the damage is caused by a third party but their insurance company has not yet paid out, is challenging the validity of the claim or is not known at all, or where the damage was not caused by a third party at all and there is no way of recouping the amount paid out for repair or replacement

Telling your insurers about fault and no-fault claims

Many people mistakenly believe that if they have a no-fault claim, they need not mention this to their insurers. This is not the case and, fault or not, if you fail to disclose the details of any claim to your insurer, your insurance will be invalid.

Even if you renew with someone else, most insurers will ask for details of claims going back between three to five years, irrespective of fault.

Rising premiums and your no claims discount

Insurance premiums generally rise in cost every year, and this is especially true in the year following a claim. This can seem pretty unfair, especially if a claim was not your fault. Some insurers’ statistics, though, show that if a person has had one motor insurance accident, they’re more likely to have another.

Even if you’ve protected your no claims discount and you’ve reported a no-fault accident, while your discount should be unaffected, your premium may still rise. This is because the discount is applied after all other factors are taken into account.

Handling insurance claims through your broker

Today, finding low cost motor insurance is a piece of cake, with many options available at the touch of a few buttons on online comparison sites. This can make choosing insurance through a broker feel quite archaic.

Your insurance broker is on hand not only to help you to secure the most suitable insurance for your needs, though. They should also be there for you to see you through the process of a claim, adding real value by taking the burden from you and liaising with your insurer on your behalf.

Your broker will also be able to advise you of the best way to handle any claims, and how your claims may affect your premiums.

Motor insurance with Ryan’s

The team at Ryan’s are on hand to help you find the most suitable policy for your unique requirements, and to ensure your claims are dealt with quickly and fairly. To find out more about motor insurance from Ryan’s, please call the Private Client Division on 01473 343300 or for business cars our Enterprise team on 01473 343491