• Unfortunate victim of motor policy

    Posted on July 5, 2019 by in About Car Insurance, Insurance tip

    I MET with an accident last week and submitted a no-fault own damage claim against the other party who hit my car from behind.

    According to the Bank Negara Malaysia motor claim guidelines, I am required to bear the betterment cost, given that my car is slightly more than five years old.

    I reckon this policy is unfair to me as a victim of reckless driving by a 19-year-old who is a P-licence holder.

    While I have to fork out a large sum from my own pocket for the betterment cost, the reckless driver just has to forgo his no-claim bonus (NCB) in the next renewal of his car insurance and more or less gets off scot-free.

    His car suffered minimum damage and is nearly 20 years old. The only cost he will incur is the summons issued by the traffic police for driving recklessly.

    To be fair to the unfortunate victim, betterment cost has to be borne by the party who is found guilty in any car accident.

    I urge the authority concerned to look into this policy.

    STAMINA NEOH Petaling Jaya

    The above article is extracted from The Star Newspaper, 28 June 2019

    We shall once again look into betterment as well as better understand what is Insurance.

    Betterment is define as the portion of cost you have to bear when your damaged parts are replaced with brand new, original part instead of used parts that best resemble the condition of your parts prior to an accident.

    Now, you need to understand the concepts or principles of insurance, then you will understand why betterment is necessary.

    One of the principle of insurance is Principle of Indemnity.

    According to the principle of indemnity, an insurance contract is signed only for getting protection against unpredicted financial losses arising due to future uncertainties. Insurance contract is not made for making profit else its sole purpose is to give compensation in case of any damage or loss.

    In an insurance contract, the amount of compensations paid is in proportion to the incurred losses. The amount of compensations is limited to the amount assured or the actual losses, whichever is less. The compensation must not be less or more than the actual damage. Compensation is not paid if the specified loss does not happen due to a particular reason during a specific time period. Thus, insurance is only for giving protection against losses and not for making profit.

    Thus, in the above scenario, the writer’s car which is slightly more than 5 years old, would have been replaced with brand new, original parts, instead of 5 years old used parts, thus, to be subjected to 15% betterment. With replacement of new parts, the writer is now in a better position prior to the accident.

    No betterment would be imposed if 5 years old parts are being used to replace the damaged part caused by the accident, as the writer’s car is only being restored back to its original condition just before the accident.

    Betterment does not come in force if the vehicle age is less than 5 years. Only vehicle age above 5 years and being replaced by brand new parts are subjected to Betterment. Normally, for vehicle age above 5 years, repairs are usually done at insurance panel workshop, where any damaged parts are replaced by similar condition used part. If vehicle owners insist of replacing old damaged part with new original parts, then betterment will kick in.

    Hope the above explanation help you to better understand what is betterment.

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