My recent dealings with insurance companies lead me to like those companies even less than I did before. Before I thought they sucked. Now I think they suck ten times worse.

Take example number one.

We have a 2007 sedan in very good, well-maintained condition. It’s an auto, with about 170,000km on the clock. On carsales.com.au similar cars will set you back about $7000 to $9000, with a few outliers above or below.

Our car has been insured comprehensively with AAMI for quite a few years. Last year’s “agreed value” (the company “agrees” – we just accept what they say) was $5200. That’s already joke-level low in a pretty warm market for good used cars.

This year they dropped the “agreed value” to $3800, while also raising the premium AND the standard excess. So what that means is, if the car gets written off, all we would get from our insurance is $3800 minus the excess and the premium, which would leave about $2500 net.

Obviously we wouldn’t be able to buy a third of a comparable car for that measly payout.

My question is, how can they call this insurance “comprehensive”?

I phoned AAMI to talk about switching from “agreed” value to market value, but the consultant warned me I’d be even worse off because they get their alleged “market” value from an organisation called Redbook, which she told me listed our car as worth no more than $3800 – tops. Looking on Redbook’s site I see our model of car listed from $4,050 to $5,850, but with the proviso that you aren’t allowed to use that valuation for insurance purposes. Only the trade-in values tally with the numbers the AAMI rep quoted to me, but in what universe do trade-in values represent the market?

I had imagined that if your car was insured for “market value” then got written off they would have to pay you enough money to replace it with a similar car. But apparently no. They just give you this hopeless joke amount and you find the bulk of the required cash from other sources. This is not what I would call comprehensive insurance. “Agreed” value is not agreed, it is simply imposed. Market value is apparently equally a joke, bearing zero resemblance to the actual market.

Comprehensive or contemptuous?

What they provide is more like a token commiseration payment.

I spoke to a broker who told me that our car was of an age where the insurance company would prefer not to bother with it. The company hoped that, by offering a contemptuous policy document, we would self-insure by switching to a policy that provides third party property damage only.

Maybe we should. I heard of an acquaintance with third party property insurance only whose car was recently written off in an accident in which they were in no way at fault. Their car had been a cheap buy, but to get a comparable one was no easy matter and the insurance company involved ended up handing over a cheque for about three times what our acquaintance had paid for the written off car. The icing on the cake came when a wrecking yard paid a few hundred dollars for the wreck. (Of course if it had been their fault, our acquaintance would have been much worse off.)

So it isn’t clear to me what happened there: it looks like “market value” really meant market value in their case, not just a contemptible “trade-in” value as quoted by a third party website.

Now for example number two.

We had a grey-market hybrid, imported from Japan. Great little car, but no ordinary insurers would touch it because it wasn’t mainstream. That meant we had to use Shannons, (owned by Suncorp) which offers “insurance for motoring enthusiasts”.

The first year things were fine. I phoned for a quote, we actually agreed on a value ($20,000) and off we went.

A year passed without incident and the renewal form arrived. I noticed that the premium was fractionally lower but what I didn’t notice – because I didn’t turn the page and go looking – was that the “agreed” value had been cut by Shannons without consultation to $12,000.

I wouldn’t have noticed except the car got T-boned by a lady in an SUV who changed lanes across an intersection just as my wife was turning from a side street.

When I checked the policy document my heart sank as I realised the trick Shannons had played. I contacted them and complained that this 40 per cent cut to the “agreed” value should have been drawn to my attention. I also pointed out that the used car market was running red hot and prices were rising, not falling. They told me to suck it up. I’d paid the premium so I’d accepted the terms. Bad luck sucker, was the message.

Anyway, I wrote them an email asking how they came up with this scam valuation and a Shannons dude replied with a return email saying they got their valuation numbers from “The Blue Book”. I asked him for a copy, but he said it was no longer available for viewing. I’m guessing the dog ate it, or something.

Next, I contacted the complaints department and said I was pissed off at how they’d cheated me, listing 14 of the same car for sale around Australia at that time with asking prices around the $20,000. Nothing anywhere as low as $12,000. A very nice mediator got in touch saying she agreed it was a bit rough but then again I had paid the premium. Still, she would go in to bat for me.

Dog ate the Blue Book

By this time the car had been declared a write-off.

On the plus side I had paid for the hire car option, so we had replacement wheels while the claim was being sorted and this might have been a factor weighing on the minds of the Shannons folk. I guess hire cars cost a bit, right?

But I think maybe the trump card was the email sent by the Shannons dude claiming the fake valuation came from the Blue Book. Because even the mediator could see that wasn’t right. The Blue Book listed a bottom value of $19,400 and a top of $24,000, so the $20,000 original agreed value was really reasonable . There was no rational basis to have lowered it at all, much less by 40 per cent. I think the dodgy email would have been a killer in any tribunal, so maybe that helped Shannons decide to fork over the full $20,000, less the excess and another couple of hundred bucks which seemed like some kind of fig leaf honour payment to pretend we’d paid a higher premium for a fairer deal. Whatever.

I asked the mediator where the $12,000 number had come from. She said Shannons told her it was “a system error”. If you ask me, the whole insurance industry is one big system error.

Mind you, according to the broker I talked to, Shannons are actually the nice guys of the industry. He reckoned some other companies would have forced me to take them to the tribunal even knowing they’d lose, just to prove to their shareholders that they are hard-arsed bastards.

Premiums for all the kinds of insurance we buy every year are skyrocketing miles ahead of inflation and are now a very appreciable item in our budget. Meanwhile the number of actual separate insurance companies is smaller than ever. Most of the familiar names are just brands owned by big umbrella companies that dictate the terms. Terms like, “we don’t want to insure against anything that might actually happen”, and “even if you make a legit claim we reserve the right to make your life miserable by fighting you over it”.

Here’s an article about people being stung by the “agreed value scam”.

Oh, and did I tell you about the house insurance company years ago (AMP, at the time) that took premiums year after year and never told us about the change in their fine print that meant if you had a business in your home then the house wasn’t insured? Happy to take the premium even when they knew they would never pay a claim. They knew our house was no longer eligible for their insurance but they didn’t bother telling us that. Ka-ching!

Nor did I mention Allianz and their workers compensation insurance which they swore we had to have even though the builder doing the work had his own insurance. Their advice was untrue, but that didn’t stop them fighting hard to avoid refunding the premiums.

They say insurance is a necessary evil.

That’s true I suppose, especially the “evil” part, these days more than ever in my limited experience.

Pay-by-the-month options available, sucker.

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