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Thomas Strachan (pictured), UK Insurance Manager at Northgate plc, examines the pitfalls associated with a lack of understanding of the different types of insurance available.
More than 45 million people hold a driving licence here in the UK, so it’s safe to say that being on the road has become part of our everyday life. It’s quite worrying to hear then, that as many as one in three UK motorists don’t understand their insurance policy, despite the fact that this is one of the most important aspects of operating a vehicle.
The findings by Churchill revealed that 35% of British drivers think that if they hold a fully comprehensive insurance policy, they can drive any car they want and still enjoy the same level of protection. However, this could not be further from the truth – and in actual fact, by breaking the rules, drivers run the risk of being fined or even prosecuted for driving without the correct insurance cover.
Operating over 57,000 vehicles and serving 7000 customers, at Northgate we have encountered a variety of issues concerning our customers’ own insurance. For example, many of our customers present a certificate of motor insurance for a vehicle, but the name on the certificate does not reflect the name on the account, or the certificate does not identify the correct registration number for the vehicle being provided.
What’s in a name?
It is important to remember that the name on the certificate must reflect the name of the account under which the customer has taken out a contract with Northgate. If this is not done, it can present issues when trying to get claims settled. Furthermore, if the customer presents a specified certificate of motor insurance that is not for the vehicle they want to hire, we are unable to release the vehicle as it will not be insured.
There are some other aspects surrounding the certificates of motor insurance that can be very confusing, one being the type of certificate issued, and secondly the class of use. It is important to remember that insurers issue two types of certificates of motor insurance, one called a ‘Specified Certificate’ which identifies the vehicle by the registration number and the other a ‘Blanket Certificate’, which is generally issued for fleets.
What is known as ‘Class of use’ can be another major issue for our customers. For example, if the cover is for social, domestic and pleasure but excludes hire and rewards. Some customers are also confused when they come across the term ‘insurable interest’. To make this a little clearer, an individual who has the potential to incur a financial loss following an incident or accident has an insurable interest in the property or interest which is insured against that event.
To demonstrate how critical it is that you understand the wording on your insurance certificate, I recently came across an example of how it can all go wrong.
A man was going to drive his son’s car the next day to return it to the garage. The son had his own insurance and the father was not insured on the policy, which was also due to expire that evening. The man thought that his certificate would automatically cover him for driving his son’s car as he interpreted the loan to include him borrowing his son’s car. However, it did not, as there was no contract between the father and son. Therefore, I would like to emphasise that this sort of cover only applies where there is a contractual loan in place – for example, when a garage loans someone a vehicle whilst their own vehicle is being serviced.
If a Northgate customer has their own insurance and they want to make a claim, they need to deal with their own insurer and our Accident Management department. However, if they are a one-time customer they can use Northgate’s policy (which is third party only cover, excluding personal effects/belongings).
We find that some of our business customers take out a vehicle on an account and tell their insurer they are the registered owners of the vehicle, but this isn’t correct, and can actually invalidate the insurance. Instead, people should actually tell their insurer that the vehicle is out on long-term hire. Furthermore, if you buy insurance but fail to disclose a material fact such as a past accident, a driving conviction or criminal offence, your insurer could decide to cancel the policy and fail to indemnify you. In this case, you would be liable for the repairs and/or total loss value of our vehicle and any third party claim.
You must check that the vehicle you are hiring is insured comprehensively, so do double check whether vehicle repairs are covered. Remember, some insurers will cover replacement engines in the event of misfuelling, while others do not. At a cost of approximately £6000 for a new engine, it is definitely worthwhile establishing the extent of cover you are actually buying.