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Motorist bumps up vehicle’s 'market value' during dispute

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A man who disputed a fall in the market value of his car from more than $20,000 to $15,000 in nine months has eked out an extra $1000 during a claim resolution hearing.

The man bought motor cover from IAG with a maximum agreed value of $27,820 in late May 2019, and was advised the current market value for his vehicle was between $21,000 and $27,000. He was involved in an accident around nine months later on March 5 last year and the vehicle was a total loss.

He says IAG initially advised him the market value of the vehicle was $13,000 at the time of the accident.

When he objected that this amount was too low, IAG increased it to $13,700, then $14,470, and finally $15,000. IAG also gave him an ex-gratia payment of $500 and a hire car from the day after the accident until the following September.

The man rejected IAG’s offer and went to The Australian Financial Complaints Authority (AFCA), arguing the market value of the vehicle should not drop so much from May one year to March the next. He sought $20,000-$22,000, which was nearer the value of the car when he purchased the policy.

AFCA ruled IAG should bump the amount up by $1000 but did not award the man further compensation and said the insurer had not misled him.

“Taking into account that opinions can vary on the market value of a vehicle when inspected after a total loss, I am satisfied the insurer should pay $16,000 as a fair market value in the circumstances,” AFCA ruled.

“I do note the insurer’s offer of $15,000 is $1,700 higher than that at which the vehicle was first assessed. It is not uncommon for the market value of vehicles to be increased when disputed during negotiations. This is an option available to any insured when an offered settlement is not regarded as satisfactory,” it added.

AFCA said IAG’s policy was clear in stating that IAG assessed the market value of a vehicle at the time of the incident, not at policy inception.

The policy stated: “Market Value. Our assessment of your vehicle's value at the time of the incident you are claiming for, using local market prices and considering the age and condition of the vehicle.”

Before the policy began, the man had a telephone conversation with IAG’s representative. He told AFCA he was advised the market value of the vehicle would be $21,000-27,000 during the policy inception call, and purchased the policy based on that advice.

A recording of the telephone call revealed that after confirming the make, model, year and specifications for the vehicle, he asked the consultant what the vehicle’s market value was. She advised that “can only be assessed once you have lodged a claim”.

The man asked for the “current market value” and she replied: “Just so we’ll have an idea … this is based on the Redbook website ... market value based on the current market, is between $21,000 and up [to] $27,000 for this exact make and model.”

The maximum agreed value was advised as $27,820 and the man decided to proceed with the market value policy.

“I am satisfied the insurer did not mislead the complainant about the policy cover in relation to the value of the vehicle,” AFCA’s ombudsman said. “The policy documentation was clear that the market value was assessed at the time of the incident.”

See the full ruling here.