The inspection has taken place, the compensation offer has arrived – and the amount is much lower than what the garage asked for the repair. This is the most common dispute over amounts in claims under compulsory motor third-party liability insurance (MTPL), and in most cases it is not about anyone cheating: two different calculations answer two different questions. As a broker, my experience is that those who understand the logic of the two routes make better decisions and lose less on the details. This article explains the difference between settlement without an invoice and settlement with an invoice, the reasons for the gap, and the role of the supplementary inspection.
- Without an invoice, the insurer pays the amount based on its own calculation, excluding VAT (net); under Section 32/A of the MTPL Act (Gfbt.), it may reimburse the gross, actual cost of repair only against a proper, itemised invoice.
- The gap between the garage's more expensive quote and the calculation typically arises from the hourly labour rate, parts prices, the question of repair versus replacement, and the “new for old” betterment deduction – these can be requested item by item and disputed.
- The supplementary inspection is not a formality: if hidden damage comes to light during dismantling, it must be requested before the repair continues – according to insurers' information sheets, the injured party bears the consequences of a missed supplementary inspection.
Two routes, two logics: calculation and invoice
In settlement without an invoice – calculation-based settlement, known at some insurers as “settlement by agreement” – the insurer's expert uses calculation software to work out the cost of restoring the vehicle on the basis of the damage assessment report: from catalogue parts prices, standard repair times and the hourly labour rate applied by the insurer. According to insurers' information sheets, the amount obtained in this way is paid net, without VAT, and there are no conditions on how you use the money: you can have the car repaired more cheaply, by your own mechanic, or not at all. This is the logic of Section 6:527 of the Hungarian Civil Code (Ptk.) – damage must be compensated in money. The route is shorter and involves less paperwork; in exchange, it works with net amounts, an average hourly labour rate and typically parts prices chosen by the expert. Pay attention to one thing: what you sign. At some insurers, accepting the settlement offer means closing the claim, while at others it expressly does not mean waiving further claims – this differs from insurer to insurer, and the wording is what counts.
In invoice-based settlement, the garage repairs the vehicle and the insurer reimburses the actual cost, including VAT, on the basis of an invoice issued in the name of the registered keeper or the owner. There is also a statutory condition for this: under Section 32/A of the MTPL Act (Gfbt.), the insurer may reimburse the cost of restoration plus VAT only if the invoice states the description of the work, the cost of materials and the labour charge, and complies with the Accounting Act. The insurer measures the invoice against the repair method recorded in the damage assessment report; some insurers pay the calculated amount as an advance and settle the difference after checking the invoice. For a company entitled to reclaim VAT, even on the invoice-based route typically only the non-reclaimable part of the VAT is payable: for a goods vehicle this is typically zero, while for the repair of a passenger car – because of Section 124(4) of the VAT Act (Áfa tv.) – it is half of the VAT.
Where does the gap between the garage's quote and the calculation come from?
- Hourly labour rate. According to the insurer's information sheet, the calculation uses the average hourly rate of the Hungarian repair industry; a franchised dealer's workshop may charge a higher hourly rate.
- Parts prices. Original, aftermarket or used (salvaged) parts, the distributor's list price or the garage's price – the two calculations do not necessarily start from the same basis.
- Repair or replacement. The expert may consider a part repairable that the garage would replace; the question of the repair method can be disputed, but it must be justified.
- Betterment deduction. Under Section 6:522(3) of the Ptk., compensation must be reduced by any financial benefit arising from the damage – if a worn part is replaced with a new one, insurers may deduct the justified difference in value between the new and the old part, typically for wear parts.
Every item can be requested: Section 31 of the Gfbt. requires a “duly reasoned” compensation offer, so ask for the itemised calculation in writing and compare it line by line with the garage's quote. In most cases, this narrows the gap down to a few specific items that can then be discussed on their merits. Common points of dispute and how to prevent them are summarised in the article on reasons for disputes and rejections.
The invoice-based route: what to watch so that the gross amount is actually reimbursed
Section 6:522(2) of the Ptk. requires the costs “needed” to eliminate the detriment to be compensated, and Section 6:525 imposes a duty to mitigate the loss – so the insurer reimburses the justified cost, not just any price. Choosing a franchised dealer's workshop is not unjustified in itself, especially for a newer vehicle under warranty, but a price that differs significantly from the usual can lead to a dispute. The practical order: before the repair, agree with the garage that it will work to the repair method in the report, that it will give advance notice of any additional costs, and that the invoice will be itemised and made out in the registered keeper's name. Many garages settle directly with the insurer under a claims-settlement authorisation – this is convenient, but in the end you need to know what has been paid and what has not. The documents to submit are listed in the claim-reporting document checklist.
Diminution in value is a separate head of claim: the reduction in the market value of a professionally repaired vehicle, which, according to insurers' information sheets, is determined using an expert methodology – taking into account the vehicle's age, mileage, the extent of the damage and any previous damage – and is not payable for minor incidents. If the damage is more substantial and the vehicle is younger, ask about it.
Supplementary inspection: the route for hidden damage
The damage assessment records the visible damage. If damage comes to light during dismantling that was not visible at the inspection, it must be reported before the repair continues – to the insurer or to the expert firm that carried out the first inspection – and a supplementary inspection must be requested; some insurers also accept a photo-based supplementary inspection. Insurers' information sheets are clear: when determining compensation, only the damage recorded in the damage assessment report is taken into account, and “the disadvantages arising from a missed supplementary inspection” cannot be passed on to the insurer. So the garage has to stop, take photos and report it – it is worth making this a condition when you order the work. For arranging the supplementary inspection, insurers typically make the same working-day commitments as for the first inspection.
Decision and dispute: what to do
With an older car, a smaller claim and a reliable mechanic of your own, the calculation-based route is often sensible; with a newer vehicle under warranty, a larger claim and a franchised dealer's workshop, the invoice-based route reimburses the actual cost. If you are unsure, request both figures in writing – the itemised calculation and the garage's quote – and compare them line by line before you sign anything. If the difference cannot be resolved, the order is: a complaint to the insurer, which must give a reasoned reply within 30 days (Government Decree 437/2016), then, as a consumer, the Financial Arbitration Board (PBT) or the courts; an independent court-registered expert's opinion is prepared at your own expense, but it carries weight. The process is described in the article on claims by the injured party. The primary route for claims settlement is the insurer's claims line; if a case gets stuck, I help where I can – I do not negotiate with the insurer in your place; I act on the client's behalf (as their agent, not the insurer's).
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Sources
- MTPL Act (Gfbt., Act LXII of 2009) Sections 31, 32/A – compensation offer, reimbursement of VAT against an invoice
- Hungarian Civil Code (Ptk., Act V of 2013) Sections 6:522, 6:525, 6:527
- Generali – MTPL claims-settlement information (net/gross reimbursement, invoice requirements, supplementary inspection)
- K&H Biztosító – MTPL claims-settlement information (with and without an invoice, supplementary inspection, diminution in value)
- SIGNAL IDUNA – motor claims-settlement information (average hourly rate, difference in value, supplementary inspection)
- Government Decree 437/2016 – complaints handling, 30-day reply
