A was involved in an accident but he was not at fault. His car market value at the time of the accident was RM65,000 but the sum insured is only RM50,000. The total claim is RM 10,000 and he has to pay excess RM400 for the claim too.
Insurance company will usually pay based on market value or sum insured, whichever lower. A will only be covered for losses and damage to his vehicle due to the accident on a pro-rata basis, in this case he insured RM50,000 for a car with market value of RM65,000 (77%), he will be paid 77% of his claim as well. The market value should however be based on the value on the time of the accident.
Please also note that if at the time of accident, the market value has dropped further to RM60,000, A will get payment of 83% of his claim (minus excess). In addition, the excess fees is applicable at the discretion of the insurance company and in some cases, no excess is imposed. A can negotiate with his insurance company on the excess.
Alternatively, A can make a third party claim, where the average clause provision will not be applicable i.e. A may claim 100% of the losses including the excess.