Insurers willing to help with car scrappage scheme

Monday, 29 June 2009 12:00

Car owners could be better off not pursuing an insurance claim and opting for the government's scrappage scheme in some cases, insurers have said.

Once a car is ten years old, it will qualify for the government's scrappage incentive and could be worth £2,000 against the price of a brand new car - but only if it is roadworthy.

However, if your old car ends up in an accident, it may be deemed uneconomical to repair and the insurance company will write it off, only offering the market value for the car - in most cases far less than £2,000.

A spokesperson for the Department of Business, Innovation and Skills, which is running the car scrappage scheme, said the car must be roadworthy, insured, taxed and MOT'd.

The government is unlikely to bend the rules even if the owner was unlucky enough to be about to take part in the scheme at the time of the accident, as it could provide a loophole to unscrupulous dealers.

"If this happened to a number of people, we would be prepared to look into it," the spokesperson said.

Car owners with this dilemma would have to negotiate with their insurance companies, the spokesperson added.

Adam Cracknell, from Aviva, warned: "Simply because a vehicle meets the qualification criteria of the new government scrappage scheme does not automatically make its market value £2,000.

"A 'loss of opportunity 'to participate in the scheme at some point in the future is not the same as 'loss or damage' and generally will not be covered by most motor policies."

Tina Shortle, marketing director for swiftcover.com, added: "To qualify for the government's scrappage scheme a vehicle has to be over ten years old, and it is often the case that the market value for a vehicle of this age is well below the £2,000 incentive offered by the scheme."

However, both insurers said they would take circumstances into account.

"We understand that garages are accepting vehicles in varied conditions, so policyholders could be better off not pursuing their insurance claim and instead using the vehicle to benefit from the scrappage plan and buying a new car," said Ms Shortle.

"We have had a number of cases where our engineers have indicated that the vehicle is to be written off. After discussing their options with our engineers, the policy holder has cancelled their claim, which means that swiftcover.com does not categorise the vehicle as a write-off as we are not dealing with the claim.

"The insured then takes the vehicle to the garage where they upgrade to a newer car and benefits from the government incentive, so they are better off."

"In the case of Aviva, where a qualifying customer has already placed a valid order under the scrappage scheme with a participating dealer and is subsequently unfortunate enough to suffer loss or damage rendering the vehicle a total loss (between ordering and delivering their old vehicle to the dealer) Aviva motor policies will deem the market value to be the scrappage scheme trade in amount (£2,000)," added Mr Cracknell.

"We haven't seen a major increase in these sorts of claims, thankfully not that many of our customers are unfortunate enough to have their car written off or stolen between ordering and delivering their old vehicle off to their car dealer."

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