I believe the insurance company will also use the subject to average clause. I think it works like this...Lets say you insure a car for RM100,000. At the time of theft the market value is estimated at RM90,000 (how the insurance co arrive at the market value is another major thesis), then they will compensate at RM90,000, but if you only insure for RM80,000 and the market value is RM90,000 then the subject to average clause will apply, meaning they will not compensate you the whole RM80,000 but rather RM71,111 that is RM80,000 divide by RM90,000 and multiply by RM90,000....this is because you have only insured part of the vehicle, RM80,000 out of RM90,000 worth so you cannot expect to be paid in full all your insurance cover when making a claim.
Similarly if you insure that car for RM150,000 for some unknown reason, you will be paid only RM90,000 because you have over insured.
If I am wrong I stand corrected.
How do you get RM71,111 when you divide RM80,000 over RM90,000 and multiply by RM90,000? Now I am confused.