Participate in car recall to avoid claim rejection

Insurance can repudiate claims or make part payment if there's an accident

When car companies recall vehicles to fix problems such as faulty airbags, or defective steering column, the exercise might seem like a hassle. But if there's a problem in the car due to these small issues, and the vehicle owner has not participated in the recall, the insurance company can reject claims.

"If the surveyor proves that the accident was due to a faculty part, it is treated as contributory negligence, which means the vehicle owner is also responsible for the loss," says Vijay Kumar, chief technical officer (motor) at Bajaj Allianz General Insurance.

The solution: If your car company is recalling your model, go ahead and resolve the issue, irrespective of whether the problem is big or small.

The most recent recall in the country was due to a faulty airbag manufactured by Japan's Takata Corporation. It is one of the largest in the US history and has a ripple effect in markets across the world, including India.

Consequently, companies such as Honda have been conducting recalls from last year, as a preventive replacement. In the past, many manufacturers, including Maruti Suzuki, the country's largest auto company, have gone through such exercises to fix their faulty parts.

A recall does not mean the vehicle is substandard. Most of the issues are small ones and often, these defects can be fixed in a day. A company informs the customers either through the dealer, email, letter, or even via newspaper advertisement that mentions chassis number of the cars. There have also been times when companies contacted customers offering free service and then fixed the problem without customer's knowledge. But such instances have been few, said experts.

Sanjay Datta, chief - underwriting, reinsurance and claims at ICICI Lombard General Insurance, says lack of participation can affect the third party liability insurance, where claims are higher than the vehicle damage. If a property is damaged, the insurance company pays a maximum of Rs 7.5 lakh. In case of death or disability, there's no cap on the amount the victim can claim. It's the court that decides the settlement amount, taking into consideration the age of deceased, income, family and other parameters. In such cases, the insurance company can either deny the claim, or ask the customer for a part-payment.

An official of a private insurance company explains that there could be a genuine case of the customer not being aware of the recall. That's why, a company will first ask for explanation from the customer and verify the claims with documentary evidence and then decide on the course of action.

The country has seen major car recalls only in the past two years. Also, forensic experts investigating an auto accident case is on the rise.

"Fixing a defective part will not only help in bringing down the liability, it will also help the car owner to save cost of repairs that may arise due to the part," says Kumar.