Insurance Q & As


To what extent, if any, are the many bicycles-turned-mini-scooters covered by an insurance policy? Is there a requirement (by law) or are they exempt?

Regulation 20 of Legal Notice 29 of 2004 regarding Pedal And Low-Powered Cycles states that:

No moped (motorised bikes) shall be ridden and no light quadricycle (Quad Bikes) shall be driven on a public road unless the vehicle is covered by a third party insurance in compliance with the requirements of the Motor Vehicle Insurance (Third-Party Risks) Ordinance.

The above would be covered under a private motor or motor cycle insurance policy (depending on the insurer’s specific internal procedure) and even require a theory test and road licence.

“Home-made” or factory-fitted motorised cycles are covered by Part I - PEDAL CYCLES AND POWER ASSISTED CYCLES of the same legislation.  Insurance is not required but the motorised cycle needs to be registered with Transport Malta and age limits are imposed as noted below;

5. (1) No person shall ride a power assisted cycle on a public road unless he or she has reached the age of sixteen years, is in possession of an identity card, and has satisfied the Authority that he or she has some knowledge of the Highway Code through a theory test.

To what extent, if any, are karozzini (horse-drawn carriages ) covered by an insurance policy? If they are, what sort of cover would (or should) they have?

Currently horse-drawn carriages (karrozzini) and any other horse drawn vehicles are not covered by any legislation; however, a regulation, a draft Animal-drawn Vehicles Regulations 2010 which falls under the Authority for Transport in Malta Act is currently being discussed.

These regulations cater for both compulsory licences and insurance when using any horses-drawn carriages on public roads. There is no date as to when the regulations will become compulsory.

For more information, please contact Transport Malta. 

If a driver injures a horse, to what extent (if any) would a motor insurance policy covers injuries sustained to the horse?

Should you be involved in an accident with a horse-drawn carriage, which is your fault and the horse is injured, your claim would be covered under the third party property damage section of your motor insurance policy.

This section is subject to a minimum legal limit of € 500,000. All accidents involving animals as third parties would be considered as property damage and thus a claim would be subject to that limit.

In order to determine the exact amount to be paid, veterinary experts would be engaged along with other experts in the field (breeders, importers etc…).  Currently, persons driving horse-drawn carriages are not required to obtain a licence, at least until the draft regulations come into force.   These regulations will increase the horse owner’s responsibility, especially in the eyes of insurers who would only pay if these are licensed and insured as they would otherwise be acting illegally.

Question: Is the insurer entitled to impose where I should be repairing my vehicle following an accident under a comprehensive policy? What if I am not to blame, can the third party insurer direct me to repair at a particular garage?

If you happen to have a comprehensive motor insurance policy, under the section which deals with cover for loss or damage to your vehicle or the section covering loss or damage you cause to third parties, you are likely to find the following condition (or similar wording):

         "At our own option, we may repair, reinstate or replace your vehicle or any part of it or its accessories or spare parts or may pay the amount of loss or damage." 

In other words, the insurer reserves the final say as to how it will put you in the same position as before the loss. Therefore, in terms of this particular condition, there is nothing that precludes the insurer from instructing you to use the services of a particular garage which it appoints for repairs to be carried out. This in fact is a very common practice for claims under other policies such as travel insurance (in respect of luggage repairs or replacement) and home insurance (when replacing items such as glass and carpets).

If you are claiming under the policy of a third-party, that insurer may also direct you to repair at a particular garage as long as in doing so, that insurer is putting you back into the position you were before the collision.

In such instances, if you are unsatisfied with how the repair works have been carried out, there is recourse against the insurer (who directed you to repair at its appointed repairer). This is especially useful if the appointed repairer fails to come up with reasonable and acceptable solutions for any unsatisfactory work. When, on the other hand, you choose which garage will repair your vehicle, you would be solely responsible for any bad workmanship as the repairer would have been your choice (and not the insurer’s).

It is therefore important that your never sign the full and final settlement form unless you are completely satisfied with the work done on your vehicle.  If the repairer offers a repair guarantee, ask for such a guarantee to be provided in writing.

Drink driving convictions are taken very seriously by insurers. Most motor insurance policies will not cover damage or liability caused in an accident where the driver was under the influence of alcohol, drugs or any other illegal substance. As a result, damage to one’s vehicle will not be recoverable and an insurer will be able to recover from the insured any amounts paid as compensation for damage or injuries caused to third parties in such circumstances.

Besides this, convicted drivers returning to the roads may face difficulty in obtaining an insurance cover or else may be required by the insurance company to pay higher premium.

My car was been hit by a vehicle which was being driven by someone who is likely to have been under the influence of alcohol. I am insured on third party basis. My insurer was unable to help me much because I was unable to claim under my policy. However, when I approached the insurers of the other party, I was told that they would be unable to pay for damages sustained to my car. I think this is grossly unfair. What are my rights?

A valid motor insurance policy is intended to cover damages or injuries caused to third parties by a negligent driver. However, an insurance policy will list a number of exceptions to this general rule. For example, an insurance policy is unlikely to provide cover to an insured driver if such driver causes damages to third parties while driving under the influence of alcohol or drugs.

In terms of law, however, an insurer would still be obliged to pay compensation awarded in a Court judgement or an arbitration decision to the injured party in spite of the policy exclusion on drink driving. If an insurer is aware that its client has caused damages to third parties as a result of drink-driving, the insurer may decide not to consider the claim from the third party until a judgement or arbitration award against its policyholder is obtained. Only once a judgement has been delivered is the insurer required by law to pay you for any damages you sustained. It is important to note that the insurer would be able to claim back such money from its policyholder on the basis that he or she had breached an important policy condition. In some respect, therefore, it is a matter of “when” rather than “if”.

Given that you are insured on third party basis, you are unable to claim under your own policy and your insurer may only assist you to a certain extent, mainly by giving you advice. You will most likely need to engage a lawyer to take legal action against the person who caused you damages and this person’s insurer. If the damages sustained do not exceed €11,646 and there are no injuries, fatalities or damaged public property involved, your lawyer will refer the case to arbitration in terms of the arbitration legislation. This means that the proceedings are faster and less costly. If, however, the damages exceed this amount or there are injuries involved, then the case cannot be referred to arbitration but rather to the Civil Court.

In this legal action, your lawyer will seek to prove that the other party was responsible for the damage or injuries caused. If it can also be shown that the other party was under the influence of alcohol then it is more likely that he or she will be found to be at fault. Of course, one would need to bring proof that the third party who caused you damages was truly under the influence of alcohol whilst driving. Normally this would be either evidence given by a witness or even better an official report following a breathalyser test carried out by the Police. It is important to keep in mind that this will not change the fact that the insurer would still have to pay you for damages sustained even if the responsible party was found to be under the influence of alcohol. Ultimately you will receive compensation once it is decided that the other party was to blame, irrespective of whether he or she was drunk or not.

An insurer may not always wait for a court judgement or an arbitration decision to compensate you and may decide to settle your claim without requiring legal action to be taken. This is likely to happen where fault is clear and where the damages are not substantial and the person who caused the damages agrees to refund the insurer in full. This removes the need to go to arbitration or the Courts.

It is worth pointing out that had you been insured under a Comprehensive policy, you would have been able to claim under your policy (you would however have to pay any policy excess and your No Claims Discount may be temporarily reduced). Your insurer would then commence proceedings against the third party insurer to attempt to recover monies it paid in respect of your claim. In respect of uninsured losses you sustained however, such as replacement car rental costs or compensation for injuries, you would probably still need to engage the services of a lawyer to obtain the compensation due to you by law.

Drink driving convictions are taken very seriously by insurers. For innocent third parties, the inconvenience such situations may cause is unquantifiable.
The consequences on the responsible party are indeed very serious. The immediate consequences are the fact that the damage sustained by the drunk driver’s vehicle are not recoverable under a comprehensive insurance policy, and that the driver may find it very difficult or very expensive to obtain insurance. The driver will also be responsible to pay back to the insurer any amounts paid to third parties as compensation which may be very substantial and thus could end up facing financial ruin.

Highway Code

Alcohol and drugs

as it will seriously affect your judgement and abilities. You MUST NOT drive with a breath alcohol level higher than 35 µg/100ml or a blood alcohol level of more than 80 mg/100ml.

Alcohol will:

  • give you a false sense of your ability to cope.
  • reduce your co-ordination and slow down your reactions.
  • affect your judgement of speed, distance and the risks involved.
  • reduce your actual driving ability, even if you are below the legal limit.
  • take time to work through your body; you may even be unfit to drive in the evening after drinking at lunchtime, or in the morning after drinking the previous evening. If you are going to drink, arrange another means of transport.

You MUST NEVER drive under the influence of drugs or reaction altering medicine. Check the instructions or ask your doctor or pharmacist. Using banned substances is highly dangerous. Never take them before driving; the effects are unpredictable, but can be even more severe than alcohol and may result in serious or fatal road accidents.
It is your duty, whether as a motorist or as a pedestrian, to contribute to road safety. Independently of the rights and wrongs of the case, it is your duty to avoid an accident if it is within your power to do so.

I was driving one day and skidded on a rather big oil patch causing damages to third party vehicles. I don’t think I should be blamed for these damages. What are my rights?

The Consumer Complaints Unit often receives calls from consumers who refuse to accept responsibility for an accident, blaming an oil spill for the occurrence. The Unit cannot decide on who is at fault, or not – that task is usually the responsibility of an arbiter or judge, depending on the case. However, some research of court judgements and insurance literature may help you understand how responsibility for an accident may be determined in similar situations.

Many drivers are aware that an oil spill makes a vehicle harder to control and brake but also increases the probability of skidding. The Maltese Courts consider a skid as a normal circumstance which, in itself, is not enough to put neither the blame nor discharge the driver from causing the accident. As in any other type of incident, the person being blamed should prove that the accident did not happen as a result of him or her being grossly negligent or reckless. Therefore, the onus of proof always lies with the person alleging the cause of the accident.

Therefore, if there is a skid, one would have to prove that this was not caused through his or her own misconduct but that it was, in effect, an unexpected event. However, the driver should not only prove that the skid was as a result of a slippery road, but that the vehicle skidded without him or her being reckless and that all the necessary precautions expected from a prudent driver on a slippery road were taken. In fact, there were instances where the court found that the driver should not be held responsible for the accident as the main cause of such occurrence was the oil spill.

On the other hand, there were also instances where the defence of skidding presented by the driver did not hold. The courts found, for example, that the accident occurred as a result of reckless driving. In such instances, the driver was held responsible as he failed to drive prudently. Had he done so, he would have avoided the skid, or might have acted in a way that led to less severe damages resulting from the skid. Indeed, in a particular case, the court established that - even though the presence of oil was given as the possible cause of the skid – “the defendant should nevertheless have been able to negotiate the curve if traveling at an appropriate speed, and ruled in favour of the plaintiff”.

Therefore, the court may still find fault with a party (irrespective of the presence of oil) if the accident is caused as a result of over speeding, not maintaining the vehicle in a roadworthy condition (such as due to faulty tyres) or as a result of a contravention of traffic rules (such as over-taking on a double line). Hence, using oil spill as the reason for the occurrence of a particular accident may not always result in favour of the driver that is being held responsible for the accident.

In such instances, it is always important that any factors which may have led to the cause of the accident are noted in the warden or police report and are backed up with proper photographic evidence. It is fundamentally important that the driver uses his driving abilities to avoid any oil spill on the road especially if he notices other collisions in the vicinity or a vehicle dripping fuel/oil.

Most importantly, you should always act in utmost good faith when narrating facts and giving evidence of the circumstances of your case. 

What happens if my unattended vehicle is stolen with its keys inside?

Insurance policy wording tends to be quite clear on this aspect, in the sense that loss or damage arising from theft whilst the ignition keys are in the car is excluded and not covered by the policy.

Such exclusion is applicable in the event the vehicle is unattended even if momentarily such as when the driver leaves the car switched on whilst withdrawing money from an ATM. In that brief period, a crafty thief could easily steal a vehicle. The insurer may subsequently reject the claim because of the exclusion mentioned above.

In addition, policies usually include a clause requiring policyholders to safeguard the vehicle from theft or damage at all times. Failure to take reasonable care may lead the insurer to reject a claim. However, to be fair and reasonable in rejecting a claim, the insurer must show that the policyholder was not only negligent but had also acted recklessly. This means that the driver acknowledged the risk yet still knowingly disregarded the consequences. A typical case scenario would be when a driver stops to withdraw cash from an ATM, parks on the other side of the road, he notices persons loitering around the area where he was parked but still leaves the windows of the car open and the keys in the ignition.

In reality, not all cases are straight forward. Some insurers may not take such a restrictive stance and thus may still decide to settle theft claims resulting from unattended vehicles. In addition, certain cases occur under particular circumstances and it is then up to the claims officer of the particular insurer to determine and decide whether the policyholder is covered or otherwise. As these cases may raise divergent points of interpretation, the parties may opt to go to arbitration or a court tribunal for the issue to be settled conclusively. 
The vehicle was stored in a locked garage but the keys were left in the ignition. What will happen in case of theft of the vehicle? 
Occasionally, the Consumer Complaints Unit receives cases relating to thefts of vehicles – with its ignition keys inside – locked in a garage. In the majority of cases, access to the car was gained by forcible and/or violent entry to the premises where the car was securely locked. Given the nature of such cases, there are a number of factors which could be taken into consideration when determining whether the insured had acted in a correct manner or was negligent. These factors include: the location of the garage, what deterrents existed and any mitigating factors that caused the driver to leave the keys in the vehicle.

Although the insured’s actions (leaving the keys in the vehicle) might be attributed to carelessness, it might not necessarily give rise to an element of outright negligence. The fact that there was forcible entry implies that the insured took reasonable precautions to protect the vehicle as is required by virtue of one of the main policy conditions referred to above. Thus, it cannot be considered that the insured was “reckless” if the garage door was correctly locked.

However, given the exclusion in the policy, it is always recommended that the vehicle and its ignition keys are never kept together; not even in a locked garage. Furthermore, it is of utmost importance that keys are never left in unsecured location such as with third parties (including parkers) and in easily accessible locations. 

Normally, every vehicle has two keys or key cards allowing access to the ignition of the vehicle. Some comprehensive and third-party fire and theft policies cover the cost of replacing lost keys or lock transmitters of a vehicle. Some policies may also cover the cost of re-programming the lock transmitter or its replacement provided that the total claim is not more than the applicable limit specified in the policy.

In the event of a vehicle theft claim, the insured would be required to present both keys to the insurer as part of the claim’s process. If the claimant is unable to present the two keys, the insurer may refuse to pay the claim especially if the vehicle can only be switched on with its unique programmed key and that it would be virtually impossible to do so otherwise. In such instances, it may result that the insured may have contributed to the loss through his gross negligence (that of not securing the two keys). In such cases, insurers must provide expert evidence illustrating just how difficult it was to start the ignition on that particular make and model of the vehicle without one of the original keys. The insured’s recklessness would also need to be proven.

Question: I have been involved in a car collision and the other party does not want to admit liability. Can the MFSA assist with determining who is at fault?

Answer: The MFSA’s Consumer Complaints Manager cannot determine cases where liability is being disputed. However, in terms of law, a case involving collision may be referred to arbitration at the Malta Arbitration Centre.

Arbitration is a means of settling a dispute between two or more parties without resorting to the formalities of a court or a tribunal.

Generally speaking, there is voluntary and mandatory arbitration.

A contract of insurance, be it motor, travel, health or any type of insurance, may include what is usually known as an “arbitration clause”. Such clause would state that, in the event of a dispute between the policyholder and the insurance company, the matter would be referred to arbitration. For example, a policyholder may object to the interpretation by the insurance company of a particular insurance provision in the contract, or refutes to a decision by the company to honour a claim. The policyholder can refer the matter to arbitration. This is usually referred to as voluntary arbitration. The policyholder should therefore make sure that, before he can refer a dispute to arbitration, there is an arbitration clause in the contract of insurance. If such clause is absent, the policyholder, in agreement with the insurance company, may still agree to refer the matter to arbitration. Decisions from voluntary arbitrations are not made public and only the parties concerned would know of the final outcome.

Arbitration is mandatory in the event of (a) any collision between vehicles, or (b) any involuntary damage to property involving vehicles, or (c) any such claim against an authorised insurer who in accordance with the Motor Vehicles Insurance (Third-Party Risks) Ordinance (Cap. 104) or any policy of insurance may be liable therefor, and (d) the value whereof does not exceed €11,646.87. A dispute for damages for personal injuries cannot be referred to arbitration.

Therefore, two parties which are locked in a dispute as to who is at fault in a collision, where damages are less than €11,646.87 and none of the parties had been injured are required to refer their case to arbitration at the Malta Arbitration Centre. Decisions taken in respect of mandatory arbitration are public.

The arbitration award is final and binding and cannot be appealed, except for points of law. This means that the parties cannot refer the case to the courts for the merits of the case to be reassessed.

Many insurers can also offer parties what is usually referred to as informal arbitration. Such arrangement is not regulated by the Arbitration Act and parties might not have the same rights (e.g. appeal) as those enjoyed by parties who refer their case to the Malta Arbitration Centre.

More information is available from the Malta Arbitration Centre’s website

Question: What if my repairer takes longer than agreed to fix my car?

Answer: If a repairer takes longer to carry out repairs than he would have agreed with the surveyor then a vehicle owner should ask its appointed repairer to contact the surveyor to explain the delay. If the surveyor finds the repairer’s explanation justifiable, the survey report would be amended and the number of days increased accordingly. This situation arises, for example, when the repairer while actually repairing the vehicle comes across some other damage that was not evident while carrying out the survey. In this instance, as well, if the surveyor confirms damages the report will be amended to include extra days for such additional repairs. On the other hand, if the repairer started working on the vehicle and stopped work in order to work on other vehicles, it is not justified and insurers cannot be held responsible for

Question: If the other party fails to lodge a claim, what are my rights?

Answer: In terms of the legislation, a party involved in an accident is obliged to inform his insurer of the accident within two weeks of the event or two weeks from the event first coming to the insured’s knowledge, if he was not present at the accident. Whenever an insurer believes that there are reasonable grounds that his client may be liable for the accident and therefore obliged to pay a claim to an injured party, the insurer is obliged to treat the event as if a claim has been made, whether the insured has notified the accident or not.

If the insurer is of the opinion that liability is to be admitted, whether in full or in part, then the insured must be notified of the intention to pay the claim and the proposed settlement amount. The notification should also include an explanation of the consequences the insured might be liable to if he objects to the payment. An insurer is entitled to recover legal costs and interest from the insured who had objected to the payment.

Insurers have recognised that many of their clients are at best intransigent and fail to file a claim or even respond to requests to file a claim. This is not acceptable and insurers are obliged to ensure that the word and spirit of the law is respected. Insurers are legally obliged to send these notifications in writing and by registered mail. However, in the Unit’s view, these notifications should be sent without delay following the lapse of the statutory two weeks notification period from the date of the event/accident, or when the third party notifies the insurer, whichever is the earlier. A policyholder who receives a notification is understood to have agreed to the payment of the claim unless, within ten days of receipt of the notice, he informs the insurer of his objection to the payment.

If a customer objects, the insurer is duty bound to inform the third party of his customer’s objection. In this case, the third party would be entitled to challenge the objection through litigation (generally through arbitration if the value of the claim does not exceed €11,640 and no persons had been injured).

Question: I have been involved in a car collision and the other party’s insurer admitted fault. I rely on my car not only to go to work but also to run errands – with a family of three children, life is quite hectic with all the extra-curricula lessons they have. As I needed a replacement car, I rented a vehicle and presented the receipt to the insurer (of the party at fault). The insurer however, deducted two weeks rental (from three weeks) on the basis that my vehicle only took a week to be repaired. The rest of the period was basically the time my car had to wait to be repaired (no fault of mine if the parts took two weeks to arrive). What are my rights?

Answer: The Unit has been quite categoric about the issue of loss of use and replacement vehicle (our previous annual reports refer). Unless there are any valid reasons for insurance companies to refuse payment for loss of use, when this is backed by proof that the complainant was not responsible for any (a) unnecessary delays in repairs and/or (b) attempt not to minimise losses, the Unit believes that the complainant has reasonable grounds to be compensated in full for the period the vehicle is unavailable and not merely when the vehicle is being repaired. An insurer could opt to make life difficult for the claimant by refusing payment and letting him resort to arbitration to defend his rights, but why should this issue be taken that far when there is ample scope for good sense to prevail (in line with previous case law of course)? 

Question: I am the third party owner of a damaged vehicle, do I have right to expect a rented vehicle for the period that I am waiting for my car to be repaired? What happens if there are no spare parts available

Answer: Sometimes, the third party’s damaged vehicle could still be in a road worthy condition. In this case the insurers’ voluntary code states that when a vehicle can still be driven, a third party is not entitled to a rented vehicle for the period the car is waiting to be repaired. The code, unfortunately, does not adequately address situations where there are delays as a result of unavailability of spare parts.

Although each case should be treated on its own merits, it is important to point out that loss of use is financial loss which a person actually incurs as a result of being deprived of the use of his own vehicle. The Maltese courts have established that an injured party (i.e. the party whose vehicle has been damaged) should be reinstated in full and rightfully is able to recover his losses and to restore his property to its pristine original state from the guilty party. However, the courts also established that a victim should always minimise his losses and not be saddled with additional expenses.

This may mean that the injured party of a vehicle which is still road worthy and which therefore can be driven safely and in respect of traffic rules may not automatically be eligible for a rented vehicle except for those days when the car is being repaired. The overriding principle is for an insurer to deal with claims fairly and promptly. There have been cases where the insurer took weeks to admit liability or find suitable replacement parts, which can create inconvenience to the injured party. In these situations, the insurer’s responsibility to provide a rented vehicle to an injured party whose vehicle is not road worthy until commencement of repairs is not discharged.

The Unit believes that the duty to determine whether a vehicle is road worthy or not lies with the insurance company and its appointed surveyor. The injured party may disagree with the surveyor’s conclusion and has every right to independently assess his vehicle’s road worthiness. This is important especially when the injured party decides to rent a vehicle with the intention to claim reimbursement from the insurer. In this case, he may also need to prove that renting a vehicle was indeed necessary and that every attempt has been made to minimise losses (such as unnecessary delays for repairs to commence). The Unit always recommends that the injured party should keep an insurer informed of any actions relating to car hire as these may affect arbitration or tribunal proceedings.

In terms of the code, the owner of a vehicle considered to be beyond economic repair (or total loss) is not entitled to a courtesy car. However, the insurer should never take more than five days, from the date it has been so declared, to inform the vehicle’s owner about this.

Many cases involving loss of use are complicated. An injured party can always claim reimbursement for loss of use by instituting proceedings against the party who caused the accident and/or his insurer. In these cases, legal advice should be sought. 

For more information click here.

Question: I am not happy with the parts that my insurer provided me, what can I do?

Answer: A car owner rightfully expects that his vehicle is repaired within the norms and practices of the repair industry and that any parts used for repairs should be of good quality. Some insurers apply a policy that non-original or recycled second-hand parts should be used to repair a vehicle which is older than five years. The principle of indemnity, that is the obligation of putting the victim to his original position, is also applicable in this instance.

Essentially it is up to the surveyor to determine the type of parts to be used. There should be no discussion about the quality of the parts – car owners should reject any parts which are of inferior quality and which impinge on the driver’s and passengers’ safety. A second hand or non-OEM part may still be of good quality. In addition, a seven or eight year old vehicle may still be well maintained but that does not automatically qualify it as being “old” and therefore meriting non-original parts. The insurer-appointed surveyor should ensure that his assessment and recommendations constitute a fair and just resolution of repair works.

In 1988, I took out a loan with one of the local banks. I was required to issue a life insurance policy and, between the various options available, I took out an endowment policy. I was led to believe that the policy would be paying me a rather handsome sum of money upon maturity in 20 years time. However, at no point, during the purchase of the policy, it was mentioned (verbally or in writing) that the maturity value can be less than that declared. I happened to be reading an article which stated that insurance policies may not pay up the declared maturity value and, upon enquiring with my insurance company, I was told that the maturity value of the policy may vary as this depends on profits made. I was told that the documentation I had been provided at the time did not state that values are guaranteed but, rather, that the values were being quoted as estimates. I believe this is deceiving and constitutes a breach of my rights because I was forced into buying a product which is not likely to deliver on its promises. What are my rights?

The Office of the Consumer Complaints Manager usually answers such questions in the following manner:

In 2009, the Unit received multiple queries and complaints similar to the abovementioned. Many policyholders questioned the resilience of their life insurance companies in the wake of the financial turmoil that left many investors worldwide uncertain of the future.

As is customary with our procedures, we would have discussed the complainant’s contentions with the insurance company which had issued the policy and examined the documentation at the time of sale of such policy. It is pertinent to point out that regulation and consumer protection regulations have evolved since 1988 and this is reflected in the quality of the documentation which is available today, as compared to 20 years ago. This does not mean that the documentation used at the time was deceiving or incomplete – one would say that there might not have been as much detailed disclosure as there is today. For sure, the type of illustrations which were given at the time of sale might have been reflective of the typical returns rewarded by life insurance policies at the time. One cannot deny the fact that these same returns now appear to be ‘historic’ due to unsettled economic times. The policy wording would not normally express any guarantee with respect to the value at maturity. The policy quotations, which would normally serve as basis to proceed with a policy, would have indicated the potential returns likely to be achieved over its lifetime. The terms normally used on the quotation would be “estimated maturity value(s)” which cannot be taken as guaranteed amounts.

It is a fact that bonus rates (mostly relevant to endownment policies) are dictated by financial conditions at the time in which they are declared. Depending on the insurer, quotations may show three indicative bonus rates, such as 3%, 5% and 7%. Although the last two scenarios may sound very generous by today’s rates, they might have been realistic at the time.

In respect of the penalties applicable if policyholders cash in their policy prior to maturity date, it is pertinent to point out that a life policy is a long term insurance contract and therefore will penalize those considering an early release. A policy can increase in value if declared bonuses remain bouyant or improve. However, declared bonuses might also be less than those in previous years - which is a major cause of concern for many policyholders. For this reason, it is premature to complain of bonus returns at this stage.

Finally, one must also keep in mind that, during this time, the policy was also giving the complainant life protection. This means that had the complainant died after payment of the first premium given the policy was not pledged in favour of the bank, his/her family would have been paid the value of the sum assured. This means that one’s death would not have left a financial burden on the family following payment of the sum assured, this aspect is most often misunderstood or forgotten by policyholders.

Question: I started a life assurance policy around five years ago which will mature within fifteen years. If my insurance company had to default, will my policy be protected? Is there a scheme in Malta, similar to the Depositor Compensation Scheme, which protects me for such eventuality?

Answer: The Insurance Business Act provides the legal framework for the regulation and supervision of insurance companies. In order for a company to be authorised and continue to be authorised it must satisfy certain requirements. One of the requirements is that the insurer must maintain adequate assets to cover the liabilities (including policyholder’s claims) arising out of the business of insurance. Assets must be unencumbered and admissible in accordance with Regulations issued under the Act. In so far as life assurance companies are concerned they are required to provide an actuarial report drawn up by an independent actuary confirming that the reserves maintained by the company are adequate to meet its liabilities.

Should an insurance company run into financial difficulties individual policyholders have the right to make a claim under the Protection & Compensation Fund Regulations for the amount remaining unpaid (subject to limits mentioned below) after all the assets of the company have been exhausted. The said Regulations exclude policyholders of unit linked policies from the right of to be compensated under the said Fund.

Legal Notice 435 of 2003, which establishes the Protection and Compensation Fund (“the Fund”) in terms of the Insurance Business Act, intervenes in situations of:

  • A hit and run accident - The Fund compensates road traffic victims who suffer dead or a bodily injury from an accident where the person and vehicle causing the injury are unknown.

  • Uninsured drivers – The Fund compensates victims who suffer any liability which may be incurred in respect of the death of, or bodily injury to, any person or in respect of any loss of, or damage to, any property of any person which is required to be covered by a policy of insurance under the Motor Vehicle Insurance (Third-Party Risks) Ordinance (Chapter 104 of the Laws of Malta).

  • Insolvency of a licensed insurer – In the event that a licensed insurer is declared insolvent and is unable to meet its obligations, the Fund covers obligations arising from a claim under a policy of insurance covering a risk situated in Malta. Payment shall also be made out of the fund if the insolvent insurer is at the time when it is unable to meet its obligations, servicing or running-off the business of insurance it was licensed to carry on under the Insurance Act. These payments are subject to certain exclusions and conditions.

If a claim is legally required to be covered by compulsory insurance, such as third party injuries from motor accidents, then that claim shall be paid in full. Other claims are limited to 75% of any one loss or €23,293.73, whichever is the less. This amount may not be absolute because there is also a limit as to how much the Fund can pay in respect of a default of one life assurance firm. So the amount may have to be equally distributed between policyholders. The mechanism as to when compensation is triggered can take some years after an insurance company is declared in default because payment of claims can only be made after a court determines that the life assurance company is definitely wound up and/or has been struck of the register of companies authorised to provide life assurance business in Malta. 

(1) On-line shopping is so convenient, even when renewing my insurance policy. When I purchase an insurance policy online, is the insurance company obliged to send me the policy documentation and other related documents by mail?

(2) I will be joining a tour next August and I preferred to purchase my travel insurance from my travel agent. Actually, I was told that the whole group will be insured under one policy. I was given a receipt for the premium and also a document which lists the benefits from the policy if I claim. Is that all the insurance documentation I need?

The Office of the Consumer Complaints Manager usually answers such questions in the following manner:

It stands to reason, that a policyholder should be provided not only with the benefits which the insurance policy may award in the event of a claim, but also the contractual terms binding on both the insurer and the insured, i.e. the policy document. At inception, the insurance policy would generally be provided to the policyholder. There is no obligation for the insurer to provide the same contract to the insured if the policy is renewed with the same insurer – however, the insurer may amend any policy conditions prior to renewal by means of an endorsement, which is usually attached to the renewal notice.

There may however be some instances in which the policy document may not be given – not because the insurer is not willing to do so but rather as a result of the contractual nature between the insurer, the insured and the beneficiaries of the policy. This may usually occur when the policy is issued to a group of people, such as a group health scheme or a group travel policy. In the former case, for example, the contracting party is normally the organization which pays for the policy and the beneficiaries of the policy are the staff of such organization. The contract between the insurer and the insured (i.e. the organisation) may not only contain the “standard terms and conditions” of a health insurance policy but also other contractual clauses of a commercial nature which may not necessarily be of interest to the beneficiaries. Given the commercial nature of the transaction, it may not be appropriate for the organisation’s staff to have access to the whole document. However, there is nothing which precludes the organisation from making available the section of the contract relating to the coverage and conditions which allow the beneficiary to know about his obligations in the event of a claim.

In terms of Insurance Rule 3 issued under the Insurance Business Act, it is evident that it is incumbent on the insurer to ensure that the contractual information to the policyholder is not only given but that, if required to do so, the insurer has to prove that it has actually provided it to the potential policyholder. Any disclosure is required to be communicated to the potential policyholder or policyholder either (a) on paper or in some other “durable medium” that is accessible to such person; and (b) in a clear and accurate manner, comprehensible to such person.
The Rule defines a “durable medium” as “… any instrument which enables the potential policyholder or policyholder to store information addressed personally to such person in a way accessible for future reference for a period of time adequate to the purposes of the information and which allows the unchanged reproduction of the information stored. In particular, durable medium covers floppy disks, CD-ROMs, DVDs and hard drives of personal computers on which electronic mail is stored, but it excludes Internet sites, unless such sites meet the criteria specified [herein].”

The same applies to many group travel policies which are issued yearly. The Unit has come across many instances where claimants had no idea whatsoever of the terms and conditions binding on them in the event of a claim, precisely because they were only provided with a copy of the cover note and the summary of benefits (which would not include details required of the insured for a claim to be valid). It may be true that some cover notes or summaries contain a reference stating that the terms and conditions could be downloaded from the insurer’s website – perhaps this is more convenient for the insurer (in terms of costs rationalization). However, this is unacceptable because the onus of making the beneficiary aware of the policy conditions cannot be shifted on the consumer merely by “informing” the consumer of a web link on any of the two documents mentioned earlier. Moreover, there is no guarantee that the policy conditions on the website (which is not the actual contract but a specimen) will remain unchanged (even if this might be remote).

In this sense, the rules emphasize that the provision of the contractual terms should be in a format which would not allow information to be changed. Technology is also making it easier for consumers to purchase or renew insurance policies on-line. While the internet has brought choice and convenience for consumers even in financial services, one should also keep in mind that the price paid for a policy should not “make or break” the customer’s decision. Not only local insurance companies are competing for business, but also foreign companies which enable Maltese customers to purchase their policies (for example, travel policies) on-line. Competition is healthy and should be encouraged – (not only where the price of the policy is concerned but also in the level of service which the insurer is expected to deliver in the event of a claim). However this may prove tricky if the insurer, which may be located abroad, does not have a claims representative in Malta. The problem is that the insured may only get to know this, in the event of a claim (unless he has read the policy on-line before purchasing).

This recurring theme – the importance of reading the insurance contract (actually, any binding contract) – features prominently in a number of travel complaints and queries, especially from consumers who had travel insurance as part of a package with their premium credit and debit cards (such as gold cards). The problem with these cardholders is that many of them completely forget to check their travel policy prior to travelling, with the consequence that many find that they are under-insured or failed to follow carefully the policy conditions. In reality, these are not situations particular to such policyholders only. However, given that cardholders may not have to utilise their travel policy until the time they are abroad, there is the risk that the cardholder may take scant interest in it.

(3) I have just returned from a trip in Europe and unfortunately, my video camera and other personal items were stolen from me. It all happened within seconds. I claimed under the travel insurance policy which came with my gold card. However, the insurance company is coming up with quite a number of conditions before it pays what I believe is my due. For example, when I claimed for my video camera, the company not only asked for proof that I actually had a video camera (such as the box, spare battery, guarantee and perhaps even proof of purchase) but for the company to pay, I have to provide the fiscal receipt of a new camera identical or similar to the one I had. I think this is absolutely unacceptable and the company should not oblige me to purchase a new camera to honour my claim.

The Office of the Consumer Complaints Manager usually answers such questions in the following manner:

Generally speaking, the insurance contract would give sufficient leeway to the insurance company as to how and under which circumstances it should pay in the event of a claim. An insurance company may choose to settle a claim by paying cash, or by substituting the stolen or damaged possession itself. It may also choose to direct the claimant to a particular merchant from where the claimant could choose the item on which a claim had been submitted. In some instances, it may also choose to repair an item (for example, in the event of a torn piece of luggage).

The Unit finds nothing untoward if the insurer asks for proof that, prior to loss, the claimant actually had a video camera. This is likely to be a procedure to reduce the incidence of fraudulent claims being made to insurers. At the same time, there seems to be a growing practice that an insurer would choose to settle a claim if the insured provides a receipt for a similar or identical item for which a claim is being made. This may not always be the case but it seems that the decision by the insurer applies for valuable items – such as a video camera, jewellery or designer objects. At first glance, this may appear to be of inconvenience to the insured (who may prefer to have the loss paid in cash). Upon closer examination, this procedure too may be part of an insurer’s procedure to address potential fraudulent claims (for example, it may not be difficult to source any accessories which comes accompanied with a video camera from third parties). The Unit finds nothing inconvenient with this procedure as long as the insurer provides the claimant in writing with the amount that it is prepared to settle for the claim and a reasonable time period for when the object needs to be replaced.

Question: I was on holiday with my family and on our outbound journey, we had to take a connecting flight. On reaching our final destination, we were informed that as our connection was tight, our luggage did not make it on the connecting flight. You can imagine the inconvenience this has caused us. To add insult to injury, we were informed that the next flight was the following day (in around 9 hours). So we went for a shopping spree, and kept the receipts for claim purposes. To our chagrin, the insurance company did not even accept our claim, despite the fact that they acknowledged the inconvenience of being deprived of our belonging at the very start of our holiday. Is this fair?

Answer: An insurer is obliged to compensate you for any loss you incur in the event that your luggage is temporarily lost in transit on the outward journey and not restored to you within a specific time period.
Some insurers may apply a full 12 hours to make it eligible for you to claim compensation for emergency items. Indeed, the consumer should be aware of the conditions of the policy for such situations. Typically, a travel insurance policy would pay for the emergency purchase of essential replacement items up to a maximum limit. The claimant should present receipts for such emergency items and also obtain written confirmation from the airline of the number of hours delay. It may also be helpful to keep any receipts provided by the carrier indicating that when the luggage had been delivered. When the traveller signs the form (usually in duplicate), it may be useful to take note of the date and time the luggage had been handed to the traveller (if left at reception, the reception might be asked to confirm this). That, too, is also proof as to the time luggage has arrived.
Had the complainant’s luggage been permanently lost, the policy would have covered the overall baggage sum insured, depending on the type of policy.
It is always advisable to take a copy of the insurance policy with you and refer to it in similar situations. Policy conditions are often quite specific. The fact that your luggage returned after 10 hours may not be sufficient to give you eligibility to claim from your insurance. Moreover, there may be situations where the insurers would consider giving an ex-gratia payment where there is evidence of inconvenience resulting from the delay. However, going for a shopping spree would not usually convince an insurer of one’s good faith – after all, the policy covers you for emergency items.

Question: I was on holiday in Greece last summer and my handbag was stolen while swimming. In my handbag I had a mobile phone, a digital camera, around €500 cash and prescription sunglasses. I made a police report and on my return to Malta, I lodged a claim with my insurer. However, the insurance company refused to honour my claim, which I think is unfair.

As the adage goes, always act prudently – as if you are not insured! This means that one should always take care of his property irrespective of any insurance cover you might have. Many travel policies include a provision which excludes payment for loss of or damage to or theft of personal belongings if left unattended. For example, some insurance policies may also recommend that you should lock your valuables in a safe while you are not around.
It is evident that you did not exercise reasonable care when you left your handbag unattended while swimming. This circumstance was excluded under your travel policy and it is on this basis that your claim was not upheld.
On the same lines, the Unit had a similar complaint whereby a lady had her handbag stolen just hours before she was returning to Malta. The lady, who was with a small group, were having breakfast and it transpired that all the group went to help themselves from the breakfast buffet, leaving all their belongings behind on the table. Although it was a very unfortunate ending to their holiday, the insurance company held the view that at least one member of the group should have stayed on the table so as not to leave any of the bags unattended. The insurer agreed to reimburse last minute expenses (such as for the re-issue of a passport) as a gesture of goodwill but did not accept a claim for the rest of the claim (such as cash and camera) as the lady’s handbag was left unattended.

On 29 May 2015, Mapfre Middlesea plc issued a Company Announcement in which it informed the general public that it has reached a preliminary agreement with Allcare Insurance Limited for the transfer of the insurance portfolio of Allcare Insurance Limited to Mapfre Middlesa plc. The preliminary agreement is subject to all regulatory approvals from the relevant authority (which includes the MFSA).  
Pending further announcements by Allcare Insurance Limited, Mapfre Middlesea plc and/or the MFSA, policyholders of Allcare Insurance Limited as well as third party claimants who have any pending claims against Allcare Insurance Limited should contact Allcare Insurance Limited.   Similarly, policyholders who have any queries about their policy, should also contact Allcare Insurance Limited.  
As announced by Mapfre Middlesea plc, once the transfer of policies from Allcare Insurance Limited to Mapfre Middlesea plc is approved, Mapfre Middlesea plc will honour all rights and obligations arising from Allcare Insurance Limited’s insurance policies until maturity.  

June 2015  

1. What implications does the liquidation have on my motor insurance policy and claim?
Setanta Insurance Company Limited (‘the Company’) is a company that was licensed in Malta by the Malta Financial Services Authority (‘MFSA’). It had been authorised to provide insurance business in Ireland under the Freedom of Services in terms of EU law. The Company ceased carrying on business of insurance, including the renewal of existing business, in terms of the Insurance Business Act with effect from close of business of 24 January 2014. On Wednesday 16 April 2014, Setanta’s Board of Directors determined that a solvent run-off is no longer possible and at an extraordinary general meeting of its members on the 16 April 2014 it was resolved that the company be dissolved for all effects and purposes at law.
In a notice to policy holders regarding cancellation of policies the liquidator noted that the ability of the company to meet its obligations under the policies remain uncertain as any and all claims are dependent upon the liquidation process. The liquidation process adopted will follow the procedures required for a creditors’ voluntary winding up.

The official notification by the MFSA is available here.

2. Who will be responsible for the company’s administration?
During a meeting of the Company’s creditors held on 30 April 2014, Mr Paul Mercieca CPA FCCA FIA was appointed as liquidator of the Company. The liquidator will have full access to information from the Company’s records and will also be responsible from informing claimants about the progress of their claim.
Another main responsibility of the liquidator will be that of keeping creditors and policyholders informed of the liquidation process of the Company. The liquidator will determine how and in what manner he will be keeping all creditors and policyholders informed.
The contact details of the liquidator are the following:
Postal address: Office 4 , Verdala Business Centre
Level 1, LM Complex, Brewery Street
Mriehel BKR 3000, Malta
Telephone: 00356 20114240 (foreign call charges may apply)
You can also contact Setanta Insurance Services Ltd, an Irish based company, on 00353 818 255255.

3. I have an insurance policy with Setanta. Is my policy still valid?
It is important that you review your position with regard to your insurance cover in light of the recent announcement by the liquidator noting that all policies of insurance issued by or on behalf of the Company will be cancelled by way of 7 days' notice or 10 days' notice to policyholders depending on the type of policy held. These Notices of Cancellation have been issued on 19 May and you should be receiving your notice soon.
Policyholders are urged to make alternative insurance arrangements without delay. Policyholders may cancel their policies before cancellation by the Company and are advised to do so by notifying their broker in writing immediately.

4. If I cancel my policy, will I have a right to a refund of premium?
Irrespective of whether the cancellation is made by the Company (see above) or the policyholder, the Company is not in a position to guarantee pro-rated return of premiums. 

5. Can I purchase a new policy of insurance with a new provider before I receive my no claims bonus certificate?
A number of insurance companies are able to offer you cover without requesting any background documents, such as the No Claims Bonus Certificate. This means that policyholders should be able to obtain alternative cover without presenting this document to their new insurer.
It is always advisable that consumers should discuss the matter with their broker or an insurance company without delay. As it is likely that a new proposal form would need to be drawn up with the new insurer, consumers should ensure that the information they provide on such an important document is correct and truthful. 

6. Where can I get a copy of my no claims bonus certificate?
At this stage, your No Claim Bonus certificate will not be available from your broker. Please refer to Setanta Insurance’s website ( for updates.

7. What will happen if I have a claim?
The liquidator has recently issued a notice informing consumers that a process has been put in place wherein all persons or entities that have any claims against the company are being requested to submit in writing full details of amounts claimed within two weeks of receiving the notice.

8. What will happen to those claims which have occurred but have not as yet been reported to the Company?
Any claims which have not yet been reported should follow the notice issued by the liquidator (see question 7 above).

9. When should we expect to receive payment in regard to valid claims lodged with the company?
All payments of claims are currently suspended and payments may only be made after the liquidator has determined all the liabilities of the Company. This exercise is likely to take considerable time.

10. Under what circumstances will the Insurance Compensation Fund become operative?
The Irish Insurance Compensation Fund is provided for under the Insurance Act 1964. The Insurance Act 1964 makes provision for the payment of claims of Irish policyholders of insurance companies authorised in Ireland or in other EEA member states that are in liquidation.
In the case of liquidation, the Irish Insurance Compensation Fund is limited to 65% of the value of a claim in respect of a risk in the State, up to a maximum of €825,000. A sum due to a commercial policyholder may not be paid from the Fund unless the sum is due in respect of a liability to an individual.
Further details can be found on the Central Bank of Ireland’s website (click here).

11. I have a pending complaint with the Company which was submitted prior to the Liquidation Notice having been issued in regard to a claim which has been rejected, what will happen to it?

The liquidator will now be responsible for any aspect relating to any pending claims and complaints against Setanta.
More information about the process will be provided by the liquidator in due course.

12. I have further questions which are not addressed above, whom can I contact?
All information about Setanta’s liquidation will be issued by the liquidator, Mr Paul Mercieca.
The contact details of the liquidator are the following:
Postal address: Office 4 , Verdala Business Centre,
Level 1, LM Complex, Brewery Street,
Mriehel BKR 3000, Malta
Telephone: 00356 20114240
You can also contact Setanta Insurance Services Ltd, an Irish based company, on 00353 818 255255.
You may also contact the Consumer Complaints Unit at the Malta Financial Services Authority on or on +356 25485700. Click here for further assistance. However, any issue relating to Setanta's liquidation process will be forwarded to the liquidator. 

Last updated: Sep 07, 2016

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