Dispute on Claim Settlement Amount (Market value)

The following is a case study published in OFS Annual report:

John was involved in an accident and submitted an own damage (OD) claim to the insurer. The insurer approved the claim on a Beyond
Economical Repair (BER) basis of RM50,000 being the market value of the vehicle at the material time of loss as determined by the loss

However, John disputed the market value quoted by the loss adjuster and contended that the vehicle was insured for RM80,000 on agreed
value basis based on the quotation received from his agent.

Our Findings
The policy was endorsed with Endorsement 113 (Reference to Motor Vehicle Market Valuation System). Based on the valuation obtained from the Motor Vehicle Market Valuation System i.e., the ISM Automobile Business Intelligence System (ISM-ABI system) showed the market value of the vehicle at the point of purchase of the insurance coverage as RM58,000. However, the sum insured for John’s vehicle was not based on the ISM-ABI system, which contradicted with the Endorsement 113 in the policy.

The case manager brought to the attention of the insurer the Bank Negara Malaysia’s Circular on Market Value of Motor Vehicles. The
aforementioned circular stated that insurers/takaful operators and their agents are required to advise consumers accordingly on the sum
insured during the pre-contractual stage or upon renewal of motor insurance/takaful coverage, based on the ISM-ABI system or any other
credible vehicle valuation database. Also, the same database reference must be used to determine the market value of the vehicle at the
point when a claim arises. Based on the above, the market value of John’s vehicle would be based by the ISM-ABI system as endorsed on
the policy.

Following the case manager’s findings, the insurer increased the offer to RM59,000 based on the ISM valuation. John accepted the offer,
and the claim was settled amicably.