The industry ombudsman has backed an insurer after policyholders complained they were misled into believing their car’s agreed value reflected its market worth.

The complainants sought $28,000 after their car was written off in January, arguing insurer Hollard’s settlement offer of $20,022 was insufficient to buy a replacement.

Hollard had assessed repair costs at $21,301, with a salvage value of $3000 – above the $20,022 sum insured.

The dispute centred on a policy renewal certificate stating: “Your sum insured may have changed to reflect the value of your car in the market. If you wish to adjust the sum insured, please contact us.” 

The Australian Financial Complaints Authority says policy documents made clear the agreed value was the maximum payable for a total loss, and the insureds were responsible for checking whether the amount met their needs. 

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The complainants argued the wording was unclear and they understood the amount nominated by Hollard to represent the vehicle’s market value.  

But AFCA finds the documents did not say the agreed value was equivalent to market worth, and Hollard’s offer was consistent with its policy.  

The certificate highlighted the agreed value and instructed policyholders to check the cover was suitable for their needs.  

AFCA has rejected the policyholders’ argument that ambiguous wording should be interpreted in their favour, finding the certificate and product disclosure statement were clear when read together. 

See the ruling here.