Agreed value or market value?

Martin owned eight vehicles, some of which were specialist vehicles. He arranged car insurance through an insurance broking firm. Some of the vehicles were insured for market value and others for agreed value. 

In 2020, Martin purchased another vehicle and he asked the broking firm to add this to his policy. He said the car was a specialist vehicle, with only a few vehicles of its type and features in New Zealand. The broking firm arranged insurance. Martin believed the vehicle was insured for an agreed value of $39,000.

In late 2023, the vehicle was destroyed, and Martin lodged a claim. He was surprised when the insurer would only pay the car’s market value of $24,000. While the sum insured was recorded as $39,000, the policy insured the car for market value, not agreed value. Martin believed he should have received the amount of $39,000. He wanted the broking firm to pay him the difference because it had not set up the insurance that he wanted.  The broking firm declined to make the payment, and Martin complained to FSCL.

Dispute

Martin said his partner told the broking firm in 2020 that the vehicle was a high-performance vehicle, and they wanted an agreed value policy. Martin said the broking firm did not provide him with written confirmation of the insurance summary, and he assumed the broking firm had arranged the insurance that had been asked for.  

Martin also noted that the insurance summaries emailed to him in later years when the insurance was renewed did not say the vehicle was insured for market value. Rather, the documents said the car had “Comprehensive Cover” or “Full Cover” which he took to mean agreed value. 

The broking firm said they had no record of a request for agreed value. They also said they had disclosed the insurance summary to Martin in 2020. They pointed to an internal email within the broking firm saying that one of their advisers would present the policy summary to Martin in person at his home.  The policy summary recorded that the vehicle was insured for market value.

Further, the terms “Comprehensive Cover” or “Full Cover” did not mean the car is insured for agreed value. Rather, they mean the car is not just insured for third party, fire and theft, but that the insured person is also covered for their legal liability for loss or damage to another person’s vehicle. 

Review

We were satisfied the policy provided market value cover for Martin’s vehicle. However, it was difficult to assess whether this had been disclosed to him in 2020. Martin said that the 2020 insurance summary had not been hand-delivered to him. There was no evidence that the insurance summary had been emailed to him. 

The broking firm’s copy of the insurance summary had some brief handwritten notes on it, which they explained the adviser had taken during the discussion with Martin. The notes referred to the frequency of premium payments and the insurance requirements for another vehicle. The notes were not dated, and there was no other written record to show the adviser had in fact met with Martin and discussed the cover for the vehicle with him.

We discussed with the broking firm the possibility of resolving the case given the limited written record when they arranged the insurance for Martin. The broking firm was open to this, and noted that the information sent in later years when the insurance was renewed was not as clear as it could have been. The broking  firm offered to settle the complaint by paying the difference between the market value of the car and the value that would have been received had it been insured for agreed value. Under the policy, if the vehicle was insured for agreed value, the insurer would pay the market value plus 20%. This came to an amount of $4,800.

Resolution

Martin accepted the broking firm’s offer, and the case was settled.

Insights

For participants

It is important for insurance advisers to keep clear and detailed records of their discussions with clients, including the dates of discussions. Records of advice are essential to assist clients to understand the advice they are getting and making informed decisions.

For consumers

Consumers should also read their policies to confirm they understand the cover they have and that there have been no misunderstandings.