Mechanical Breakdown Insurance covers $40 off a $1,200 repair bill
STACY SQUIRES / Stuff
Serena Han battles an insurance company, which sold her and her husband mechanical breakdown insurance that would only cover a tiny portion of an unexpected repair bill.
Christchurch man Zhihao Zhang paid $1,405.80 for a year of mechanical breakdown cover when he bought a 2015 Mercedes-Benz last year.
But when he had to file a claim in March, he was horrified to find insurance would only pay $40 of the estimated $1,200 repair bill.
Zhang said the policy sold to him specifically excluded AMG cars, which is short for Aufecht, Melcher and Grossaspach, the division of Mercedes-Benz that produces performance vehicles.
His car was an AMG series vehicle, but he said the sales agent for insurer Autolife had not reported the exclusion.
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“I was misled about what the police were covering. I was not informed of the police exclusion,” he said, his words translated into English by his wife, Serena Han.
Had he realized the exclusion, he said he would never have purchased the policy and demanded a refund from Autolife.
Zhang complained to the Insurance and Financial Services Ombudsman Program and the Commerce Commission, and Autolife chief executive Kishor Kumar said the company would not comment while the matter was pending. the Commerce Commission and the Ombudsman.
In an email to Zhang on April 8, Kumar said Autolife refunded him $296.56, which was the “unused” portion of the policy’s coverage period, and canceled the policy.
Zhang and Han realized they should have read the policy more carefully before paying it, but Han said Autolife was the expert on his insurance and should have realized that they were selling him insurance that didn’t. did not suit his needs.
Han said when the couple complained, Autolife told them they had been given a seven-day cooling-off period during which they could have canceled the policy, which was issued with the wrong vehicle model listed. .
She said AMG parts were expensive and had to be imported from Singapore, and the potential cost of repairs was the reason Zhang took out insurance.
Autolife policies also excluded other high-cost performance cars like Ferrari and Rolls-Royce.
Zhang bought her policy directly from the insurer, although mechanical breakdown insurance is more often sold by car dealerships, which take commissions on sales from the insurers.
It was one of three types of insurance that were covered in a critical commission report late last year. The report followed a report from Australian regulators that found low value of insurance policies sold by car dealerships.
During the three-year period, just under 100,000 mechanical breakdown insurance policies were sold each year, the commission reported, earning premiums of just over $100 million annually to insurers.
The auto finance and top-up review included interviews with 62 policyholders, suggesting that some were buying insurance they did not fully understand.
The commission found that the average annual premium for mechanical breakdown coverage was $1,047 and the average payment was $1,246.
The commission calculated that the probability that a holder of a mechanical breakdown insurance policy would make a claim and that the claim would be accepted was 15%.
He revealed that claims had been made on 22% of mechanical breakdown insurance policies and that 70% of claims had been “accepted”, although this did not mean that the full cost of repairs was covered, as deductibles and exclusions would have reduced claim payments.
Autolife is a subsidiary of Beneficial Insurance.
Pet insurance was Beneficial Insurance’s biggest line of business, financial statements filed with the Companies Office show. Of the $15.7 million in premiums collected in the 12 months to the end of March last year, only $1.2 million was collected by Autolife, which also sells auto loan gap insurance and a credit contract indemnity insurance.