Issue Date:  -  Thursday, 21 September 2000

Hire Car Insurance Confusion

Consumers using hire cars and taking out the hire car company’s insurance have found the insurance anything but comprehensive, with some consumers finding themselves liable for large repair bills.

In co-operation with a Mandurah consumer, the Ministry of Fair Trading checked the insurance coverage offered by four popular hire car companies with mixed findings (see table below).

"People renting vehicles often think they have the same type of (comprehensive) insurance on the vehicle as they would have on their private car" Commissioner for Fair Trading Patrick Walker said. "Due to the wording and style of some contracts, consumers often do not know where they stand, until they have an accident", Mr. Walker said.

Of the major hire car companies approached, all had a compulsory excess payable of between $1,500 and $2,500 in the event of a claim being made. They all offered an ‘excess reduction’ arrangement which in some cases involved an extra $10 per day on the hire arrangement to reduce the excess to around $300. The downfall seemed to be that if consumers did not observe all the local driving laws, their insurance would not be valid. As one consumer pointed out "put simply, if the driver is in the wrong …no cover."

The Ministry believes it is very important that people intending to hire cars be informed of the insurance pitfalls which in most cases, are not easy to detect. With so many car hire companies all competing for a slice of the business created by people using rental vehicles, Ministry staff are seeing a lot of (at first glance) ‘good deals’ on offer.

The Ministry of Fair Trading here in Western Australia will be heading a push to develop standard wording for rental agreements and insurance policies in plain English. As car rental organisations are often national companies, the changes will need to apply in all States and Territories.

"In order to be of value to the motoring community, standard contracts would need to be in plain everyday English’, Mr. Walker said. "Anyone seeking to rent a vehicle should shop around, ask what the insurance does cover, and not rush into cheap ‘all inclusive’ hire car deals."

	Company 1	Company 2	Company 3	Company 4
Single car cover (no other vehicle involved)	Covered. Providing the hirer has not breached the hiring agreement	Not in their terms and conditions	Liable if damage is caused in a single vehicle accident or with another moving vehicle in which all parties are moving above the speed of 25 kmh	Not in their terms and conditions
Local laws (eg: speeding)	Providing the road laws are observed the hirer is covered. eg. If a person is under the influence of alcohol and is involved in an accident they are not covered	As Company 1 and for speeding tickets etc. driver to pay and pay excess if involved in an accident	Not in their terms and conditions	If in contravention of legislation or regulations there is no cover.
Overhead damage (eg: low tunnel hits roof)	Liable. eg. Driving a hire truck through a tunnel and misjudging the height	Each case looked at individually. Mainly concerns commercial vehicles although some hirers have been known to stand on the roof of a hire car at sporting events etc	Each case looked at individually	Liable for overhead and underbody damage regardless of cause when no other vehicle is involved
Undercarriage damage (eg: rock hits muffler)	Liable. If not in breach of agreement hirer limited to amount of excess agreed to on contract.	Hitting kerbs or driving over median strips and damaging the undercarriage the driver would be liable.	Each case looked at individually.	Liable for overhead and underbody damage regardless of cause when no other vehicle is involved
Excess	Excess applies but can be reduced by optional insurance. Excess amount can vary eg. driving in the bush, driving at night	Excess applies but can be reduced by optional insurance. Company encourage hirers to take out excess insurance.	Excess applies but can be reduced by optional insurance.	Not in their terms and conditions