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 Community
Issues
 Motor-vehicle
COE Insurance
In recent weeks, there has been a debate on the issue of motor-vehicle
insurance. The local media as well as the general community have sought to
air their views on the matter.
We bring you some of the arguments presented.
Our task is not to comment on the issue, but to put information collected
from various sources here and let you form your own opinion.
Excerpt of The Straits Times Editorial "Shady Car Insurance" 18
Sep 2000
"The motor-insurance
business has been hauled over the coals in recent weeks by a
furious motoring public for sharp practices. Insurers cannot
complain of unjust criticism, bar the truism that too many
consumers are not mindful of the caveat emptor principle in
business...
"Recent practices beg
the question of whether industry practices are transparent enough.
Disclosures about arbitrary premium setting, and omissions which
border on breach of faith, have centred on two features. One is
including the COE in the insurance cover. As this quantum is not a
physical asset which can be degraded if a car is stolen or written
off in a crash, the COE component is pure profit for insurers -
even if the discount factor is estimated at only 5%. It is nothing
short of taking customers for a ride. The GIA demurs that banks
and finance companies which give vehicle loans insist on its
inclusion. The regulatory authorities should step in to put the
matter right, on both the insurance and banking side. Insurers
have now been advised by the GIA to offer customers the option of
working in the COE factor, or to exclude it. They should stop
fudging and excise it altogether, as a start to reforming their
image. Motorists should grow wise to what is plainly an
unwarranted surcharge...."
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Insurance companies will be
asked to inform all customers that they have an option not to insure
their Certificates of Entitlement (COEs) when they buy motor-vehicle
insurance. The General Insurance Association of Singapore (GIA) has
clarified that its members may have been complacent in not informing
customers that they had this option. (Straits Times 7 Sep 2000)
Excerpt of MY VIEW Column in The Straits Times of 3 Sep 2000
"Perhaps the time has come to
do away once and for all with the need to factor in the COE value in
vehicle policies. LTA says it is not a requirement. Even the association
for insurers says the COE component is a minor factor as most claims are
for repairs, and not for total wreckage.
"If so, why still stick the
term "including COE value" in car policies and make owners pay
more in premiums?
"Finally, owners can start
taking action straightaway to safeguard against the unfair practices of
their insurers. Think of it as an exercise similar to the search for the
petrol station which offers the best pump prices and gifts.
"They should shop around for
the insurer that offers them the best deal, and not be penny-wise and
pound-foolish." TAN Ooi Boon
Excerpt of letter
from President, GIAS, to The Straits Times dated 3 Sep 2000.
"Vehicle owners have the option
to insure their vehicles at market value, with or without the COE element.
However, most financial institutions require the COE to be insured as a
condition for the loans, as vehicle loans are structured based on the
market value of the vehicle, including COE. For credit prudence, lenders
would generally expect the value of insurance cover to be at least
equivalent to the loan amount. This would explain why most vehicles are
insured with COE.
"When the sum insured does not
include the COE, the general practice is for insurers to offer a 5%
discount off the premium. This is because the sum insured does not impact
the premium pricing as much as the public might think. Most insurance
claims are for repairs rather than total loss. Therefore, the weightage
given to premium pricing for the COE component is correspondingly lower
since the bulk of the premiums charged goes towards paying partial losses.
"..... When the COE value is
included in the cover, the insurance company would pay the policyholder
the prevailing market value of the vehicle, including the COE
value....When the COE value is excluded, the claims settlement would
exclude the COE value. The vehicle owner would receive the COE Refund
Certificate which he can use within 12 months to either purchase a new
vehicle or sell in the open market at a discount.
".....We are currently
reviewing the practices of the motor-insurance industry, to better explain
to policyholders the different insurance options they have available, how
much their vehicle is worth insuring for, and what the premium will be for
the different options." SEOW Nee Shek, President, General
Insurance Association of Singapore.
"Motor insurers here do allow
car owners the option of not insuring the Certificates of Entitlement (COEs)
on their vehicles. But there is a catch. Such motorists will get only a 5%
discount on the premium, compared to what they would pay for full
insurance coverage, including the COE, said the General Insurance
Association of Singapore (GIA)." The Straits Times 2 Sep 2000
Excerpt of a letter
to The Straits Times dated 1 Sep 2000
"If a car is deregistered, the
owner receives a credit for the PARF and COE from the Land Transport
Authority (LTA)... A car is deregistered when it is exported, when it has
been stolen or if it is to be scrapped. There appears to be no logic
whatsoever for a finance company or a bank to require PARF and COE to form
part of the insured value of the car." IRVIN LEISHMAN
Excerpt of a letter
to The Straits Times dated 30 Aug 2000
"I, too, have asked the same
question (Can insured value include COE?) of my car insurance company
every time I renewed my policy.
"And the answer has always been
that the difference in premium, between a policy with and without the
Certificate of Entitlement (COE) is very marginal. The two figures were so
marginal that I opted for the one which included COE.
"Would anyone -especially those
in the insurance or the legal profession - care to comment, especially
since the COE can easily amount to half of the total car price?" LEE
Pian Kang
Excerpt of a letter
to The Straits Times dated 28 Aug 2000
"We were told
the Certificate of Entitlement value did not have to be insured, but no
one informed the insurance companies. I telephoned mine and was told all
insurance companies valued the car inclusive of the COE, even though they
do not assume any risk for the COE. Would anyone care to comment?" David
LOH
"Motorists here
say it is time insurers stopped asking them to cover the value of the
Certificate of Entitlement (COE) for their cars as it is not
required. They also say it is pointless to insure something that can
neither be destroyed nor stolen, and which will be refunded to them by the
Land Transport Authority (LTA) if their vehicle is wrecked totally.
The Consumers Association of Singapore (CASE), too, has expressed concern
over this matter and is calling on financial institutions to clarify why
COE coverage is a condition for extending car loans." (The Straits
Times 1 Sep 2000) |
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