Growth of New Insurance Category in Australia

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Over the last 4 years there has been the sprouting of a new category in Australia in the car insurance – car rental industry, that of car rental excess insurance.

Initiated  by Des and Steve Sherlock of Tripcover, at the start of 2012, it now includes some 5 players in the Australian market. They inlcude:

  1. Tripcover – Car Rental Excess Insurance
  2. Allianz Rental Vehicle Excess Cover
  3. Hiccup
  4. Rental Cover
  5. Car Trawler

This category has the potential to eat into the large profits that the car rental companies have been enjoying for decades. What is different about this category is that unlike using
travel insurance or credit cards to hope you are covered for what you think you should be covered for, this car rental excess insurance is designed specifically for  competing head to head with the car rental companies.

The main difference between the insurance product and the car rental companys’ product, is that in the event of an accident you would need to claim with the insurers such as Allianz Global Assistance, QBE, whereas if you use the more expensive car rental companies waiver (CDW) they handle any damage issues.

And by expensive we mean very expensive. The car rental companies waiver can cost as much if not more than the rental per day with the car rental excess insurance supplied by Tripcover coming in as low as $5.60 per day.

The category has seen amazing growth over the last 4 years with estimates that some
$12M in sales in the last financial year, from these companies. This represents about 200,000 policies sold out of 6.5M rentals in Australia per year or around of 3% of the market so far.

It is predicted that by 2020 the car rental excess insurance market in Australia will be 10% of the car rental market, worth $38M.

Comparison of Credit Card, Standard Travel Insurance and Dedicated Rental Insurance

car-rental-insurance-option-comparison

When renting a car in Australia or New Zealand, it is very important to have quality insurance coverage for the vehicle. You have several options available, and by comparing and contrasting the different types of insurance, you can have a better idea of what you might need.

Credit Card

Many times, the credit cards you already have in your wallet will actually have collision coverage included on them. If you choose the right credit card to pay for the rental, you could actually receive coverage with zero deductible, or at least a very low deductible. This is quite different from the high cost of insurance through the car rental companies. The right card has the potential to provide coverage for any of the costs for which you might be liable, such as damage to the car, or even a theft.

There are two issues consumers should keep in mind when using this method of coverage for their rental vehicles.

  1. Check your credit card’s fine print related to rental car coverage exceptions. Often credit cards only cover the rental company’s standard CDW inclusions. This can mean things like windscreen, tyres, undercarriage and hail damage for example, are not included. As a rule of thumb, if the fine print does not say that these items are included in coverage, then safer to assume they are not, and then consider using a different credit card or another method of coverage.
  2. Secondly it can be a hassle to deal with the credit card companies in the advent of a claim.

Still, given the amount that you could possibly save in the event of an accident, it does make sense at least to consider utilizing credit card coverage for the rental.

Make sure that your credit card company offers this type of coverage, as some do and some do not. Look through the policies regarding the coverage it offers, and make sure it is applicable in Australia or New Zealand – or any country you might be visiting for that matter.

Standard Travel Insurance Cover

In some cases, you may also have collision coverage available through your travel company. If you buy a travel insurance policy for your vacation through many companies in Australia and New Zealand, you will have the option of adding on insurance for your car rentals. However, it is important to make sure that the amount of excess coverage is high enough (at least $4000) and check the fine print for exclusions. Similar to credit card cover, travel insurance often only covers the rental company’s standard damage and CDW. For example when renting with Thrifty the standard damage does not include windscreen, undercarriage, single vehicle accidents and hail damage. In this case if your travel insurance only covers standard damage, then it won’t be enough to cover these items.

Dedicated Rental Insurance

Of course, there’s always the option of buying your rental insurance right through the car rental company. This is something they will actually encourage you to do. It’s a simple solution since you can do it right at the counter. However, that does not necessarily mean it is the best solution. The cost of the insurance through the company is expensive, and could be close to the cost of the rental itself, which could double your overall expenditure. When you buy insurance through the rental company, you should not think that it will automatically cover the entire cost of damage or theft. Look at what you’re deductible or excess will be. It can be in the thousands in many cases and often you need to buy the premium coverage option to be fully covered and reduce your excess to zero.

Dedicated Car Rental Reimbursement Insurance

A newer and lesser known alternative to credit cards, travel insurance and insurance direct with rental companies, is car rental reimbursement insurance.  It works very similar to the rental company’s cover, however it costs significantly less, as low as $6.77 per day for a seven day rental, and can be purchased independent of the rental company. This mean that if you damage the rental car, the rental company will still deduct the applicable excess amount from your credit card, however if you have purchased a reimbursement policy, then you receive a refund within 10 days of the claim being made, provided you have driven the car within terms and conditions of the rental contract.

Australia first car rental reimbursement cover provider is Tripcover.com.au, which offers such cover for Australian resident travelling in Australia and around the world, as well as cover to international visitors to Australia. A rental car insurance for New Zealand residents is also available. The products are created and managed in partnership with Allianz Global Assistance.

Now you have real choice

Take the time to research all of your options for your car rental insurance, and then choose the one that makes the best financial and coverage sense for you.

Six Ways To Save $$$ On Your Xmas Rental Car

  1. Book Early: Firstly, save by booking your rental car two months ago, sorry 🙂 If you leave it any longer you will get really stuck, so book ASAP. At least you will know this for next holiday season.
  2. Use comparison sites: like VroomVroomVroom.com.au , http://www.discovery-carhire.com.au/ and www.Oodles.com.au and you are bound to get the best rates.
  3. Off Airport Rentals: Don’t get the rental at the airport as there are airport loading fees and generally the rates are more expensive.
  4. City Versus Suburbs: Check out  the rates suburb by suburb as you can sometimes get better deals outside the city centre locations.
  5. Standalone Car Rental Excess: Don’t take up the car rental companies’ offer to reduce your deductibles or excess liability, more commonly called CDW (collision Damage Waiver) This can nearly double your rental. Use standalone car rental excess reduction sites like tripcover.com.au . Their cover starts at around $9 per day and reduces down to around $5 per day over 15 days and covers ALL incidences including windscreens, single vehicle accidents, overhead damage etc. Use your AU or NZ Frequent Flyer number for a further 10%.
    tc8
  6. Discount Codes. Look out for discount codes like this one:  47684365   This will give you a 15% discount with Europcar, for example:

With Code:e1
Without code:
e2

Some Complaints from Car Renters

Car renters struggle to give up old tricks

What is it about the car hire industry that makes it a candidate for the most poorly behaved corporate sector in Australia?

Over a decade or more up until the middle of last year, it seemed to me the car renting business had become virtually incapable of telling the truth about the real cost of renting a car.

The headline rate that appeared in advertisements was usually about half what you’d be up for when you added all the asterisked charges, then put petrol in the tank. Heaven help you if you took the car back with a tank that needed topping up at the renter’s sky-high prices
Read more:  October 4, 2010

Comments

· I booked a car online for one day in Sydney for a fleeting day trip to be at a special occasion for an old friend. The email receipt I received for my reservation mentioned an additional fee for ‘excess reduction’ on top of what I’d already paid for excess cover, but did not mention what the excess would be if I did not pay the fee. I found out when I arrived to pick up the car that it was a whopping $3500 excess which I think is a risk few people would be willing to wear. So in fact my rental for the day was $30 more than I was quoted PLUS an additional airport fee of $18 which was also not mentioned along with the “airport concession fee recovery” of $11 quoted in the receipt. No way would I have rented a car for the day if I’d known how expensive it would be.

Commenter
BelaS
Melbourne
October 04, 2010, 10:46AM

 

Read the contract. Be aware of your responsibilities. Ignore the super deals advertised and negotiate the full price at the counter. Use your phone/camera take photos of vehicle before you leave for damage reference. Would you lend your brand new car to a complete stranger without any conditions for $50 a day?? No, so cover your arse and read the fine print.

Commenter
Barney  Melb
October 04, 2010, 10:47AM

 

If you have insurance, you shouldn’t have to worry too much about excessive charges for damage. Take a video camera and do a once-over of the car to identify any marks and report any that aren’t on the paperwork before you leave the car park. Other than that, there isn’t too much that can go wrong. If you forget to fill up before returning the car, it’s hard to blame the rental company. The fuel gauge will indicate full for a while after you fill up.

Commenter
jules
Location
melbourne
Date and time
October 04, 2010, 10:52AM

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