Frequently Asked Questions - Insurance

A key role of the MFSA is that of responding to consumer queries on a wide range of issues relating to financial services. This section gives you easy access to commonly-asked questions about insurance aspects.

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Lost Keys

Question: I have lost my car keys.  Can I recover the cost of new keys under my motor policy? Can I still claim for the theft of my vehicle?

Normally, every vehicle has two keys or key cards allowing access to the ignition of the vehicle. Some comprehensive and third-party fire and theft policies cover the cost of replacing lost keys or lock transmitters of a vehicle. Some policies may also cover the cost of re-programming the lock transmitter or its replacement provided that the total claim is not more than the applicable limit specified in the policy.

In the event of a vehicle theft claim, the insured would be required to present both keys to the insurer as part of the claim’s process. If the claimant is unable to present the two keys, the insurer may refuse to pay the claim especially if the vehicle can only be switched on with its unique programmed key and that it would be virtually impossible to do so otherwise. In such instances, it may result that the insured may have contributed to the loss through his gross negligence (that of not securing the two keys). In such cases, insurers must provide expert evidence illustrating just how difficult it was to start the ignition on that particular make and model of the vehicle without one of the original keys. The insured’s recklessness would also need to be proven.

Pedal Cycles

Question: To what extent, if any, are the many bicycles-turned-mini-scooters covered by an insurance policy? Is there a requirement (by law) or are they exempt?

Regulation 20 of Legal Notice 129 of 2004 regarding Pedal And Low-Powered Cycles states that:

No moped (motorised bikes) shall be ridden and no light quadricycle (Quad Bikes) shall be driven on a public road unless the vehicle is covered by a third party insurance in compliance with the requirements of the Motor Vehicle Insurance (Third-Party Risks) Ordinance. 

The above would be covered under a private motor or motor cycle insurance policy (depending on the insurer’s specific internal procedure) and even require a theory test and road licence.

“Home-made” or factory-fitted motorised cycles are covered by Part I – PEDAL CYCLES AND POWER ASSISTED CYCLES of the same legislation.  Insurance is not required but the motorised cycle needs to be registered with Transport Malta and age limits are imposed as noted below;

5. (1) No person shall ride a power assisted cycle on a public road unless he or she has reached the age of sixteen years, is in possession of an identity card, and has satisfied the Authority that he or she has some knowledge of the Highway Code through a theory test.

Horse Drawn Vehicles

Question: To what extent, if any, are karozzini (horse-drawn carriages ) covered by an insurance policy? If they are, what sort of cover would (or should) they have?

Horse Drawn Vehicles are regulated under the Use of Animals and Animal-Drawn Vehicles on the Road Regulations, 2016.

These regulations fall under the remit of Transport Malta and cater for both compulsory licences and insurance when using any horses-drawn carriages on public roads.

These regulations will increase the horse owner’ s responsibility, especially in the eyes of insurers who would only pay if these are licensed and insured as they would otherwise be acting illegally.

For further details in this regard, please contact Transport Malta via their website.

If a driver injures a horse, to what extent (if any) would a motor insurance policy covers injuries sustained to the horse?

Should you be involved in an accident with a horse-drawn carriage, which is your fault and the horse is injured, your claim would be covered under the third party property damage section of your motor insurance policy.

This section is subject to a minimum legal limit of €500,000. All accidents involving animals as third parties would be considered as property damage and thus a claim would be subject to that limit.

In order to determine the exact amount to be paid, veterinary experts would be engaged along with other experts in the field (breeders, importers etc.)

Car Repairs and Repairers

Question: Is the insurer entitled to impose where I should be repairing my vehicle following an accident under a comprehensive policy? What if I am not to blame, can the third party insurer direct me to repair at a particular garage?

If you happen to have a comprehensive motor insurance policy, under the section which deals with cover for loss or damage to your vehicle or the section covering loss or damage you cause to third parties, you are likely to find the following condition (or similar wording):

“At our own option, we may repair, reinstate or replace your vehicle or any part of it or its accessories or spare parts or may pay the amount of loss or damage.”

In other words, the insurer reserves the final say as to how it will put you in the same position as before the loss. Therefore, in terms of this particular condition, there is nothing that precludes the insurer from instructing you to use the services of a particular garage which it appoints for repairs to be carried out. This in fact is a very common practice for claims under other policies such as travel insurance (in respect of luggage repairs or replacement) and home insurance (when replacing items such as glass and carpets).

If you are claiming under the policy of a third-party, that insurer may also direct you to repair at a particular garage as long as in doing so, that insurer is putting you back into the position you were before the collision.

In such instances, if you are unsatisfied with how the repair works have been carried out, there is recourse against the insurer (who directed you to repair at its appointed repairer). This is especially useful if the appointed repairer fails to come up with reasonable and acceptable solutions for any unsatisfactory work. When, on the other hand, you choose which garage will repair your vehicle, you would be solely responsible for any bad workmanship as the repairer would have been your choice (and not the insurer’s).

It is therefore important that your never sign the full and final settlement form unless you are completely satisfied with the work done on your vehicle.  If the repairer offers a repair guarantee, ask for such a guarantee to be provided in writing.

Drink Driving

Question: My car was been hit by a vehicle which was being driven by someone who is likely to have been under the influence of alcohol. I am insured on third party basis. My insurer was unable to help me much because I was unable to claim under my policy. However, when I approached the insurers of the other party, I was told that they would be unable to pay for damages sustained to my car. I think this is grossly unfair. What are my rights? 

A valid motor insurance policy is intended to cover damages or injuries caused to third parties by a negligent driver. However, an insurance policy will list a number of exceptions to this general rule. For example, an insurance policy is unlikely to provide cover to an insured driver if such driver causes damages to third parties while driving under the influence of alcohol or drugs.

In terms of law, however, an insurer would still be obliged to pay compensation awarded in a Court judgement or an arbitration decision to the injured party in spite of the policy exclusion on drink driving. If an insurer is aware that its client has caused damages to third parties as a result of drink-driving, the insurer may decide not to consider the claim from the third party until a judgement or arbitration award against its policyholder is obtained. Only once a judgement has been delivered is the insurer required by law to pay you for any damages you sustained. It is important to note that the insurer would be able to claim back such money from its policyholder on the basis that he or she had breached an important policy condition. In some respect, therefore, it is a matter of “when” rather than “if”.

Given that you are insured on third party basis, you are unable to claim under your own policy and your insurer may only assist you to a certain extent, mainly by giving you advice. You will most likely need to engage a lawyer to take legal action against the person who caused you damages and this person’s insurer. If the damages sustained do not exceed €11,646 and there are no injuries, fatalities or damaged public property involved, your lawyer will refer the case to arbitration in terms of the arbitration legislation. This means that the proceedings are faster and less costly. If, however, the damages exceed this amount or there are injuries involved, then the case cannot be referred to arbitration but rather to the Civil Court.

In this legal action, your lawyer will seek to prove that the other party was responsible for the damage or injuries caused. If it can also be shown that the other party was under the influence of alcohol then it is more likely that he or she will be found to be at fault. Of course, one would need to bring proof that the third party who caused you damages was truly under the influence of alcohol whilst driving. Normally this would be either evidence given by a witness or even better an official report following a breathalyser test carried out by the Police. It is important to keep in mind that this will not change the fact that the insurer would still have to pay you for damages sustained even if the responsible party was found to be under the influence of alcohol. Ultimately you will receive compensation once it is decided that the other party was to blame, irrespective of whether he or she was drunk or not.

An insurer may not always wait for a court judgement or an arbitration decision to compensate you and may decide to settle your claim without requiring legal action to be taken. This is likely to happen where fault is clear and where the damages are not substantial and the person who caused the damages agrees to refund the insurer in full. This removes the need to go to arbitration or the Courts.

It is worth pointing out that had you been insured under a Comprehensive policy, you would have been able to claim under your policy (you would however have to pay any policy excess and your No Claims Discount may be temporarily reduced). Your insurer would then commence proceedings against the third party insurer to attempt to recover monies it paid in respect of your claim. In respect of uninsured losses you sustained however, such as replacement car rental costs or compensation for injuries, you would probably still need to engage the services of a lawyer to obtain the compensation due to you by law.

Drink driving convictions are taken very seriously by insurers. Most motor insurance policies will not cover damage or liability caused in an accident where the driver was under the influence of alcohol, drugs or any other illegal substance. As a result, damage to one’s vehicle will not be recoverable and an insurer will be able to recover from the insured any amounts paid as compensation for damage or injuries caused to third parties in such circumstances.

Besides this, convicted drivers returning to the roads may face difficulty in obtaining an insurance cover or else may be required by the insurance company to pay higher premium.

Oil Spills and Skidding

Question: I was driving one day and skidded on a rather big oil patch causing damages to third party vehicles. I don’t think I should be blamed for these damages. What are my rights? 

Many drivers are aware that an oil spill makes a vehicle harder to control and brake but also increases the probability of skidding. The Maltese Courts consider a skid as a normal circumstance which, in itself, is not enough to put neither the blame nor discharge the driver from causing the accident. As in any other type of incident, the person being blamed should prove that the accident did not happen as a result of him or her being grossly negligent or reckless. Therefore, the onus of proof always lies with the person alleging the cause of the accident.

Therefore, if there is a skid, one would have to prove that this was not caused through his or her own misconduct but that it was, in effect, an unexpected event. However, the driver should not only prove that the skid was as a result of a slippery road, but that the vehicle skidded without him or her being reckless and that all the necessary precautions expected from a prudent driver on a slippery road were taken. In fact, there were instances where the court found that the driver should not be held responsible for the accident as the main cause of such occurrence was the oil spill.

On the other hand, there were also instances where the defence of skidding presented by the driver did not hold. The courts found, for example, that the accident occurred as a result of reckless driving. In such instances, the driver was held responsible as he failed to drive prudently. Had he done so, he would have avoided the skid, or might have acted in a way that led to less severe damages resulting from the skid. Indeed, in a particular case, the court established that – even though the presence of oil was given as the possible cause of the skid – “the defendant should nevertheless have been able to negotiate the curve if traveling at an appropriate speed, and ruled in favour of the plaintiff”.

Therefore, the court may still find fault with a party (irrespective of the presence of oil) if the accident is caused as a result of over speeding, not maintaining the vehicle in a roadworthy condition (such as due to faulty tyres) or as a result of a contravention of traffic rules (such as over-taking on a double line). Hence, using oil spill as the reason for the occurrence of a particular accident may not always result in favour of the driver that is being held responsible for the accident.

In such instances, it is always important that any factors which may have led to the cause of the accident are noted in the warden or police report and are backed up with proper photographic evidence. It is fundamentally important that the driver uses his driving abilities to avoid any oil spill on the road especially if he notices other collisions in the vicinity or a vehicle dripping fuel/oil.

Most importantly, you should always act in utmost good faith when narrating facts and giving evidence of the circumstances of your case.

Theft of Vehicle While Unattended

Question: What happens if my unattended vehicle is stolen with its keys inside? 

Insurance policy wording tends to be quite clear on this aspect, in the sense that loss or damage arising from theft whilst the ignition keys are in the car is excluded and not covered by the policy.

Such exclusion is applicable in the event the vehicle is unattended even if momentarily such as when the driver leaves the car switched on whilst withdrawing money from an ATM. In that brief period, a crafty thief could easily steal a vehicle. The insurer may subsequently reject the claim because of the exclusion mentioned above.

In addition, policies usually include a clause requiring policyholders to safeguard the vehicle from theft or damage at all times. Failure to take reasonable care may lead the insurer to reject a claim. However, to be fair and reasonable in rejecting a claim, the insurer must show that the policyholder was not only negligent but had also acted recklessly. This means that the driver acknowledged the risk yet still knowingly disregarded the consequences. A typical case scenario would be when a driver stops to withdraw cash from an ATM, parks on the other side of the road, he notices persons loitering around the area where he was parked but still leaves the windows of the car open and the keys in the ignition.

In reality, not all cases are straight forward. Some insurers may not take such a restrictive stance and thus may still decide to settle theft claims resulting from unattended vehicles. In addition, certain cases occur under particular circumstances and it is then up to the claims officer of the particular insurer to determine and decide whether the policyholder is covered or otherwise. As these cases may raise divergent points of interpretation, the parties may opt to go to arbitration or a court tribunal for the issue to be settled conclusively.

Question: The vehicle was stored in a locked garage but the keys were left in the ignition. What will happen in case of theft of the vehicle?

Sometimes thefts of vehicles also occur when the ignition keys are inside and the car is locked in a garage. In the majority of cases, access to the car was gained by forcible and/or violent entry to the premises where the car was securely locked. Given the nature of such cases, there are a number of factors which could be taken into consideration when determining whether the insured had acted in a correct manner or was negligent. These factors include: the location of the garage, what deterrents existed and any mitigating factors that caused the driver to leave the keys in the vehicle.

Although the insured’s actions (leaving the keys in the vehicle) might be attributed to carelessness, it might not necessarily give rise to an element of outright negligence. The fact that there was forcible entry implies that the insured took reasonable precautions to protect the vehicle as is required by virtue of one of the main policy conditions referred to above. Thus, it cannot be considered that the insured was “reckless” if the garage door was correctly locked.

However, given the exclusion in the policy, it is always recommended that the vehicle and its ignition keys are never kept together; not even in a locked garage. Furthermore, it is of utmost importance that keys are never left in unsecured location such as with third parties (including parkers) and in easily accessible locations.

Arbitration and Insurance

Question: I have been involved in a car collision and the other party does not want to admit liability. Can the MFSA assist with determining who is at fault? 

In terms of law, a case involving collision may be referred to arbitration at the Malta Arbitration Centre.

Arbitration is a means of settling a dispute between two or more parties without resorting to the formalities of a court or a tribunal.

Generally speaking, there is voluntary and mandatory arbitration.

A contract of insurance, be it motor, travel, health or any type of insurance, may include what is usually known as an “arbitration clause”. Such clause would state that, in the event of a dispute between the policyholder and the insurance company, the matter would be referred to arbitration. For example, a policyholder may object to the interpretation by the insurance company of a particular insurance provision in the contract, or refutes to a decision by the company to honour a claim. The policyholder can refer the matter to arbitration. This is usually referred to as voluntary arbitration. The policyholder should therefore make sure that, before he can refer a dispute to arbitration, there is an arbitration clause in the contract of insurance. If such clause is absent, the policyholder, in agreement with the insurance company, may still agree to refer the matter to arbitration. Decisions from voluntary arbitrations are not made public and only the parties concerned would know of the final outcome.

Arbitration is mandatory in the event of (a) any collision between vehicles, or (b) any involuntary damage to property involving vehicles, or (c) any such claim against an authorised insurer who in accordance with the Motor Vehicles Insurance (Third-Party Risks) Ordinance (Cap. 104) or any policy of insurance may be liable therefor, and (d) the value whereof does not exceed €11,646.87. A dispute for damages for personal injuries cannot be referred to arbitration.

Therefore, two parties which are locked in a dispute as to who is at fault in a collision, where damages are less than €11,646.87 and none of the parties had been injured are required to refer their case to arbitration at the Malta Arbitration Centre. Decisions taken in respect of mandatory arbitration are public.

The arbitration award is final and binding and cannot be appealed, except for points of law. This means that the parties cannot refer the case to the courts for the merits of the case to be reassessed.

Many insurers can also offer parties what is usually referred to as informal arbitration. Such arrangement is not regulated by the Arbitration Act and parties might not have the same rights (e.g. appeal) as those enjoyed by parties who refer their case to the Malta Arbitration Centre.

More information is available from the Malta Arbitration Centre’s website

Failure to Lodge a Claim

Question: If the other party fails to lodge a claim, what are my rights? 

In terms of the legislation, a party involved in an accident is obliged to inform his insurer of the accident within two weeks of the event or two weeks from the event first coming to the insured’s knowledge, if he was not present at the accident. Whenever an insurer believes that there are reasonable grounds that his client may be liable for the accident and therefore obliged to pay a claim to an injured party, the insurer is obliged to treat the event as if a claim has been made, whether the insured has notified the accident or not.

If the insurer is of the opinion that liability is to be admitted, whether in full or in part, then the insured must be notified of the intention to pay the claim and the proposed settlement amount. The notification should also include an explanation of the consequences the insured might be liable to if he objects to the payment. An insurer is entitled to recover legal costs and interest from the insured who had objected to the payment.

Insurers have recognised that many of their clients are at best intransigent and fail to file a claim or even to respond to requests to file a claim. This is not acceptable and insurers are obliged to ensure that the word and spirit of the law are respected. Insurers are legally obliged to send these notifications in writing and by registered mail. These notifications should be sent without delay following the lapse of the statutory two weeks notification period from the date of the event/accident, or when the third party notifies the insurer, whichever is the earlier. A policyholder who receives a notification is understood to have agreed to the payment of the claim unless, within ten days of receipt of the notice, he informs the insurer of his objection to the payment.

If a customer objects, the insurer is duty bound to inform the third party of his customer’s objection. In this case, the third party would be entitled to challenge the objection through litigation (generally through arbitration if the value of the claim does not exceed €11,640 and no persons had been injured).

Life Insurance

Question: In 1988, I took out a loan with one of the local banks. I was required to issue a life insurance policy and, between the various options available, I took out an endowment policy. I was led to believe that the policy would be paying me a rather handsome sum of money upon maturity in 20 years time. However, at no point, during the purchase of the policy, it was mentioned (verbally or in writing) that the maturity value can be less than that declared. I happened to be reading an article which stated that insurance policies may not pay up the declared maturity value and, upon enquiring with my insurance company, I was told that the maturity value of the policy may vary as this depends on profits made. I was told that the documentation I had been provided at the time did not state that values are guaranteed but, rather, that the values were being quoted as estimates. I believe this is deceiving and constitutes a breach of my rights because I was forced into buying a product which is not likely to deliver on its promises. What are my rights? 

Many policyholders questioned the resilience of their life insurance companies in the wake of the financial turmoil that left many investors worldwide uncertain of the future.

It is pertinent to point out that regulation and consumer protection regulations have evolved since 1988 and this is reflected in the quality of the documentation which is available today, as compared to 20 years ago. This does not mean that the documentation used at the time was deceiving or incomplete – one would say that there might not have been as much detailed disclosure as there is today. For sure, the type of illustrations which were given at the time of sale might have been reflective of the typical returns rewarded by life insurance policies at the time. One cannot deny the fact that these same returns now appear to be ‘historic’ due to unsettled economic times. The policy wording would not normally express any guarantee with respect to the value at maturity. The policy quotations, which would normally serve as basis to proceed with a policy, would have indicated the potential returns likely to be achieved over its lifetime. The terms normally used on the quotation would be “estimated maturity value(s)” which cannot be taken as guaranteed amounts.

It is a fact that bonus rates (mostly relevant to endowment policies) are dictated by financial conditions at the time in which they are declared. Depending on the insurer, quotations may show three indicative bonus rates, such as 3%, 5% and 7%. Although the last two scenarios may sound very generous by today’s rates, they might have been realistic at the time.

In respect of the penalties applicable if policyholders cash in their policy prior to maturity date, it is pertinent to point out that a life policy is a long term insurance contract and therefore will penalize those considering an early release. A policy can increase in value if declared bonuses remain buoyant or improve. However, declared bonuses might also be less than those in previous years – which is a major cause of concern for many policyholders. For this reason, it is premature to complain of bonus returns at this stage.

Finally, one must also keep in mind that, during this time, the policy was also giving the complainant life protection. This means that had the complainant died after payment of the first premium given the policy was not pledged in favour of the bank, his/her family would have been paid the value of the sum assured. This means that one’s death would not have left a financial burden on the family following payment of the sum assured, this aspect is most often misunderstood or forgotten by policyholders.

Question: I plan to obtain a loan facility from a bank and I had been asked to purchase a life assurance policy. Do I have to purchase that policy from the bank, if it offers it to me?

In Malta some banks are tied intermediaries of insurance companies and are therefore able to promote and sell life insurance policies of that company. Although banks may provide you with brochures on life policies which they promote, you are entitled to shop around for other policies issued by other insurance companies as long as they meet the bank’s requirement. Ask your bank to provide you with details of their requirements. Banks cannot require you to purchase only products which they are promoting and you should feel free to refuse any offer from the bank in this respect.