AUTO POLICY:

Even though the National Automotive Policy of the Federal Government is yet to fully take-off, insurance firms have started taking advantage of the policy by insisting on higher premiums on existing automobile insurance packages and also dropping the policy of annual depreciation.
Under the auto policy which seeks to discourage importation of used vehicles, importer will pay 35 percent import duty and another 35 percent levy, making it 70 percent, which invariably shoots up the cost of such vehicles and puts them at par with those assembled locally.

Even though the National Automotive Policy of the Federal Government is yet to fully take-off, insurance firms have started taking advantage of the policy by insisting on higher premiums on existing automobile insurance packages and also dropping the policy of annual depreciation.
Under the auto policy which seeks to discourage importation of used vehicles, importer will pay 35 percent import duty and another 35 percent levy, making it 70 percent, which invariably shoots up the cost of such vehicles and puts them at par with those assembled locally.
Shipping Position Daily confirmed that, insurance firms have since jacked-up premiums and also jettisoned the statutory business practice of depreciation, which indicates that premiums drop in value as the vehicle gets older.
 Our correspondents confirmed that, the practice has been embraced by all the insurance firms since the beginning of the year, after government announced that higher import duty and additional levy would be imposed on imported vehicles.
A copy of the review by a foremost insurance firm (identity withheld) which had been sent to its motor policy holders confirmed that, its decision was predicated on the auto policy.
A copy of the letter which was sighted by our correspondent read:  “Following the approval of the National Automotive Policy by the Federal Executive Council (FEC) on October 2, 2013, it has become imperative for us to review the process of determining the sum insured of motor vehicles at the point of insurance policy renewal to better protect you, our valued customer.
Prior to now, it was our policy and practice to automatically depreciate the value of vehicles at the point of renewal. However, in the light of the new policy and its anticipated effects in the market; we are of the strong opinion that continuing with this practice will be disadvantageous to you.
Shipping Position Daily investigations revealed that, collection of the 35 per cent is yet to commence at the ports, but insurance firms have since, predicated their new positions of 70 percent tax jack-up.
The letter of increase in premium and cancellation of depreciation, which was sent to one of our sources and upon which he was told that the premium on his vehicle for 2014 remains the same as 2013 confirmed the development.
The letter read in part: “The new policy as introduced will automatically raise the tariff payable on imported new and used vehicles from 20% to about 70%.  This in essence will lead to an increase in the prices of most vehicles as well as spare parts which are all imported. Invariably, this means that the value of your vehicles with respect to replacement or repair cost will automatically go up. If the insured value of your vehicle is depreciated at renewal, we foresee you may be put at a disadvantage at the point of making a claim, months down the line, well after your motor insurance policy was renewed. Please note that in the event of claims, the depreciated value of your vehicle(s ) will be much lower than the open market value of the same or similar type of vehicle
The cost of spare parts would also have increased significantly, such that in the event of an actual claim for Partial Loss, if the estimated cost of repairs is more than 65% of the sum insured of the vehicle, your claim will be treated as a constructive total loss rather than as a partial loss owing to the fact that repairs of the vehicle would now seem to be uneconomical relative to the under-insured value of your vehicle. This is in line with the Constructive Total Loss clause in your insurance policy. “
However, an insurance expert told our correspondent that, insurance firms are only taking undue advantage of the new auto policy, “they expect that the new auto mobile policy will be a major driver of growth in the Insurance sector”, he explained.
But from the perspective of the insurance firm, it is only natural to review the insurance policy on vehicles, be stopping depreciation. An official argued that, doing otherwise will mean, “that the company will pay you off on sum insured basis and consequently take possession of the damaged vehicle”.
“ Under normal circumstances this will be to your advantage, but looking ahead we feel that such instances may leave you, our valued customers feeling short-changed as the settlement offer will not in any way meet up with open market replacement cost of same or similar vehicle”, the official explained.