Sorting Out Insurance
Newcastle Herald
Tuesday December 17, 2002
THE good news came first: My daughter had just passed the test and was now a licensed driver.
Naturally she wanted to go for a drive, solo, to surprise friends. Can you remember wanting to do the same?
The bad news was only a few minutes away. Insurance! Wait, I said, until I sort out the insurance. I don't know whether you're covered and you might hit a Merc.
I know that car insurance for young drivers costs more. This daughter being our first child to get a licence, I didn't realise how much more.
I phoned NRMA Insurance and said I wanted to change our policy to cover my 18-year-old daughter's use of my wife's car.
My wife and I drive cheap (but good) cars, preferring to waste our money in other ways, and usually we insure only the other driver's vehicle, or third party property damage insurance as this cover is known. I don't think we've ever made a claim.
In view of what was undoubtedly increased risk we were going to consider comprehensive insurance for the little Mitsubishi, which is appreciated much more than its cold book value of about $5000.
What followed over the next 45 minutes was a lesson in confusion.
Joanna told me that listing my daughter as a driver would create a premium of $1100 and an excess of $450 for my wife and $850 for my daughter.
If we didn't list my daughter as a driver the premium would be $500, the excess for my wife $450 and the excess for my daughter $2050.
Our third party property policy, by way of comparison, cost $140. We could upgrade that same policy to include my daughter if we paid a premium of $290, and I wasn't game to ask about the excess.
This was the first I'd heard of not listing a younger driver and having, nonetheless, cover in the event of an accident. The insurance company obviously catches up with the excess.
But, even so, here was a concept I was having trouble grasping.
In the event of my daughter having an accident while unlisted the year's premium plus the excess would be $2550, which is about $600 more than the combined premium-excess if she were listed on the policy.
With no accident the unlisted policy was $600 cheaper than the listed. So, in listing our daughter we were really paying an extra $600 so that we would save $600 if, and only if, she had an accident!
Then I phoned AAMI, and things were about to get worse.
It wanted $1750 as a premium with my daughter declared as a driver, and that was at the company's nominated and reduced value of $4500 for the car. I didn't like the ratio.
But if she were an occasional driver, I was told, I could insure the car for a premium of $325. That was better.
But, Rachel asked, how often would she drive the car?
I don't know, I replied, but probably less often than she would like to.
Would it be more than once a week?
Probably, I said.
Then I'd have to pay the $1750 premium. If it were no more than once a week $325 would do the trick. So how often would she drive the car?
But, I asked, how could you know how often she drove the car? Any accident would surely be on her weekly outing at the wheel, not her daily outing.
I didn't like this.
AAMI was encouraging me, perhaps even inviting me, to be dishonest, and I sensed the groundwork for an argument in the event of a claim.
There are not, I'd imagine, many newly licensed young people who manage to borrow the family car only once a week!
A few days after this exchange I phoned the AAMI line again, yesterday, and Jake told me there was no such thing as an occasional driver. If my daughter drove the car at all, he said, I'd have to pay the higher premium.
This, you can see, is riddled with potential for argument.
Third call was to GIO, which told me it would allow my daughter to drive under my wife's lower premium if the daughter drove the car no more than once a fortnight.
But, I asked, how would you know? How could you know?
I scurried back to NRMA Insurance, where I was not asked how often my daughter would drive the car and where, I was assured, it didn't matter how often she drove it.
Nor, I was assured, was I failing to make full disclosure if I didn't list my daughter on the policy.
It seems to me that there's some funny business in the insuring of young drivers, and I'm happy to pay a higher premium to avoid it. jcorbett@theherald.com.au
© 2002 Newcastle Herald