Cash in lieu in insurance means where the insurance company exercises the option of giving you cash for repair of your car instead of them having it repaired for you. There are a number of ways an insurance company can settle a motor insurance claim: by having your car repaired, or by giving you compensation in case of total loss or giving you cash for repairs. Insurance companies are technically liable for poor car repairs should you suffer injuries as a result.
Thus for an insurance company to remove themselves from the latter kind of situation they should just be liable for the cost of repairs and not arranging for repairs. That is different in Kenya and elsewhere where insurance companies arrange for the cost of repair in a bid to save a few shillings. An insurance company can opt for cash in lieu in a number of instances.
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A standard motor insurance policy document in Kenya says cash can be provided where the parts to be replaced are out of stock and waiting for restocking can take inordinately long periods or where the parts are not available at all, as in the case of older models.
Another instance is where an insurer may find that your vehicle has been repaired poorly in the past, or it has corrosion in the same area of damage. An insurer is not liable for poorly done previous repairs or corrosion on your vehicle. They can argue that they are putting in a better position than you were in previously therefore going against the principal of indemnity in insurance. They would therefore be putting you in a better position as a result of an accident than the contract allows. Due to this they may elect to provide “Cash In Lieu of Repair” to fulfil their side of the contract. You have to remember that you have the lawful entitlement to have your car repaired where you wish, and the contract of insurance is there to indemnify you for your loss.
Your insurer may well be in breach of contract if they do not cover the full cost of repair that you have incurred should you have your vehicle repaired at your choice of repairer.
Sometimes, the insurance company will offer you only what they will pay what it would cost them to repair at their approved repairer. This sometimes results in them paying you less than what you would have wished.
Also remember that an offer to indemnify you does not mean you have been indemnified. Some companies by offering clients less cash in lieu than what it would cost to independently repair the vehicle, is therefore wrong.
They usually offer compensatory amounts less VAT, labour charge and other charges, in a scheme that leaves a bitter taste in the mouths of the clients. It is wrong not to factor in all costs that will properly compensate the client. An insurance claim is compensatory in nature and attempts by insurers not to cover the same is actionable. Your insurance company may offer you a lower figure than it cost to repair your vehicle. They are not allowed to do this, and they are not playing fair. You can always seek redress from an arbitrator.
Where the claim is total loss, it is right for you to ask for cash in lieu to save your car especially if it is an older model you would not like to lose. You can then repair it at your own time and cost. The insurer is also not held for any liability for repairs carried out.
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An insurance industry that plays fair results in more trust with the insuring public and more insurance uptake and therefore growth of the economy.
Washington Ndegea
Chairman, Bima Intermediaries Association of Kenya (BIAK)
