Consumers still surprised by having to pay insurance excesses

8 March 2017

Many people are still surprised by having to pay an excess on their insurance claim, says Insurance & Financial Services Ombudsman, Karen Stevens.

Up to 10 percent of calls received by the IFSO Scheme are about insurance excesses. “Over 22 years we have received many questions and complaints about excess, but in most cases, it is absolutely standard to have to pay an excess when your claim is accepted.”

“An excess is a form of self-insurance,” says Karen. “It helps to avoid too many small claims which would otherwise increase premiums for everyone else.”

“We encourage people to carefully read their insurance policies, which will spell out when you must pay an excess and how much it will be. Ask your insurer for details, or if there are excess options. Some choose to increase their excess and pay a lower annual premium.”

The two main issues people contact the IFSO Scheme about are: having to pay an excess when you are not at fault in a car accident; and having to pay more than one excess.

“If someone’s car has been damaged by another driver, people can be surprised about having to pay the excess up front,” says Karen. “If the other driver was insured, and their company accepts they were at fault, the excess can be refunded and the no-claims bonus reinstated. But in many cases, the only way to recover the excess is to take the other driver to the Disputes Tribunal."

Another common complaint is when separate events result in separate excess amounts. For example, if several windows in your house are broken on separate occasions, or if your car is damaged on separate occasions, there are likely to be separate excess amounts charged.

In a recent house burglary, a Samsung tablet, running shoes, and house and car keys were stolen. The insurer charged an excess under both the contents and vehicle policies, because of the car key. The owner argued the car key should come under the contents policy. The complaint was investigated by the IFSO Scheme and the insurer agreed to settle the complaint by paying an “ex-gratia” payment of $333.  This does not happen in every case as the IFSO Scheme has no power to require insurers to make any payments outside the terms of the policy, on a goodwill basis.

The amount of excess varies according to the type of insurance, and some policies will waive the excess in certain circumstances, for example some car policies don’t require an excess to be paid for a broken windscreen.

Most of the time, for most people, paying an excess is part of making an insurance claim.

See our policy excesses information sheet.

www.ifso.nz