Insurance scam

[Pib]

It may be legal, but in my book it is still a scam.

Let's say you bought a car in June last year, when the x-rate was around 30. Say you paid 380,000 pesos (13,000 USD) for said vehicle. You then proceed to buy full-coverage insurance for 28000 pesos (about 433 USD). If your vehicle is stolen or is wrecked they are supposed to pay you back so you can get one the same value, right?

Fast forward today. X-rate is around 54. You check the classified adds and lo and behold. The vehicle that you bought for 380000 pesos is now worth 650,000 pesos (higher rate, new taxes mayhaps?). You think you would be covered, after all you paid 3.3 percent of the value of your vehicle at the moment that you bought insurance. Wrong! The insurance company would only cover up to the original amount in pesos! You would need to cough up another 433 USD to get full coverage. Check next week if the value of your vehicle changes.

So... the insurance company get your pesos at 30/1 but does not adknowledge that. You go from 3.3% to 6.6% for basically the SAME coverage. Just like that. I AM @$%&^@$? MAD!!!!!! Same goes for property insurance.

So, check with your insurance company. You may find that your property, your savings for a rainy day, may not be enough to buy an umbrella should something happen.

[newuser]

Pib,

Your insurance company is more generous than mine. When I received my renewal from them, there was a letter attached which gave the following example if you initially insured a house at 500,000 RD (the example is the same for autos, jewelry or whatever may be insured):

Initial amount of coverage - 500,000 RD
Value at time of loss - 1,000,000 RD
Amount not covered - 500,000 RD

They use the formula

Initial coverage divided by the actual value = % insured

With the above example

500,000 RD divided by 1,000,000 RD = 0.50 or 50%

The insurance company then reimburses you at 50% of the amount originally insured (not the actual value). So 50% of 500,000 RD would be 250,000 RD

If you look at this in terms of dollars lets use the exchange rates on Jan. 2003 (22.50) and Jan. 2004 (53.50).

Initial amount of coverage was
500,000 RD at 22.50 exchange = 22,222 US
Insurance settlement of
250,000 RD at 53.50 exchange = 4,672 US

Don't forget that you also have to pay the deductable from the settlement.

This scenario is a nightmare in terms of pesos and a financial disaster in terms of dollars. The only way to avoid this outcome is to update your coverage every few months (or every few days with the way the peso is devaluating).

[Pib]

What do we do now? Is there a company that gives you insurance in USD? What are businessmen doing?

[BushBaby]

I fully acknowledge the frustration & annoyance in PIB's question but must come to the aid of the Insurance Companies on this one. When you take out insurance it is up to a value in currency - not the value of a vehicle. If the vehicle gets bashed several times by other drivers & you don't have to claim on your own insurance because you beat the Crap out of those bad drivers that hit you to get the money, then your vehicle is worth LESS than what you insured it for. If you then write it off in an accident, you still get the value of the insurance (less the waiver part) !!

It is the responsibility of the insured person to make sure that his/her vehicle is insured to the value of the vehicle, so if the car costs more to replace, he/she should extend the value of the policy to cover that increased cost!! This will of course mean a larger premium needing to be paid!! Same goes with household property insurance & contents insurance. It is always YOUR responsibilty to make sure Gold, Diamonds, paintings etc that increase in value are kept up to date in value terms when re-insuring.

As you so rightly say, insuring to a US $ value with a claim being settled in US $'s would get past most of the problems, but to date we do not appear to have such a facility open to us here. Any decent insurance people out there want to make a killing????

Good hunting dear Pib, let us know how you get on!! - Grahame.

[Loren]

As an insurance agent myself, I would place some of the responsibility on the agent who has a certain responsibility to encourage and educate the policy holder on coverages. The insurance agent should either make sure you understand the limitations of coverage when you purchase it, or in the case of the declining peso, he or she should be contacting policyholders to offer additional coverage. Think about it, it is a sales opportunity for the agent, plus they are performing a legitimate service, looking out for the interests of the insured. I want to also emphasize right here that when the insurance companies design less than ideal policies, usually the agent has nothing to do with it, agents but heads with the insurance companies all the time, at least independent agents as opposed to agents that are employed by the insurance companies.

In the states one of the main things that get insurance agents sued is when they fail to sell adequate coverage. The person who has a loss that is not covered by the insurance policy turns around and sues the agent saying that the agent should have sold them more coverage. Agents lose these cases a lot, on the theory that insurance is complex and it is the duty of the agent to explain and make sure the insured has enough coverage, it is not the duty of the insured to understand what they are buying.

I don't necessarily like this, and I think there are some flaws with that doctrine, but it is the landscape of things right now. I know the D.R. has an independent agency system, so if your agent isn't being proactive and calling you in to go over your coverages and make sure you are protected, you can consider switching over to a different agent. Demand the service! It's a lucrative business, make them work for your money!