The General Insurance Association of Singapore (GIA) has issued a caution to private car policyholders, saying that their insurance policies could be voided if they used their vehicle for "hire or reward" purposes.
In a statement yesterday, GIA said that it has observed an increasing use of passenger car vehicles by motor policyholders for “hire and reward” usage, i.e., for ferrying passengers in return for a fare.
The statement said: “GIA would like to inform private car policyholders that while it neither supports nor disagrees with the rise of private car hire services, motorists need to be aware that their private car insurance policies have a "limitation to use" condition, which restricts usage to social, domestic and pleasure purposes.
“This means that if the vehicle is used for “hire or reward” purposes, the insurer is entitled to void the policy on account of breach of warranty, and the policyholder can be denied indemnity under the policy. In the event of an accident, for instance, the insurer will not be liable to pay for damage to the vehicle insured, damage to third-party property, or bodily injury resulting from the accident.”
GIA pointed out that motorists should also be aware that while an insurer may deny indemnity to the policyholder on property damage claim, the Motor Vehicle (Third Party Risks & Compensation) Act disallows an insurer from denying compensation to claimants for third party bodily injury. However, the same Act also has a provision in Section 8 (3) which states that “any sum paid by an insurer in or towards the discharge of liability of any person which is covered by the policy by virtue of this section shall be recoverable by the insurer from that person”.
This provision in the Act thus gives the insurer the right to seek full recovery from their policyholder of the losses paid out, under a condition in all motor insurance policies titled “Avoidance of Certain Terms and Rights of Recovery”. As most cases of injury claims tend to be of substantial amounts, a policyholder will suffer heavy financial loss if not covered by an expanded motor insurance policy.
Insuring vehicles for “hire and reward”
For policyholders who have a policy with a “limitation to use” warranty and who wish to ferry passengers for “hire and reward”, there are GIA member insurers that are prepared to expand this limitation to allow the insured vehicle to be used for “hire and reward”.
GIA thus advises motorists to check with their own insurer or other insurers serving the Singapore motor insurance sector to find out if their private car policies with standard restriction for use can be widened to cover business apart from social, domestic and pleasure usage. Interested policyholders may then approach these insurers for a quotation.