Posted On: August 27, 2007, 2:13 pm CDT

Posted By: Anon

Well put, Ratemaker.

How do you insure against a perception? How do you value a percieved loss? What's the cost of "diminished value"? Is it a percentage of value? Is it a flat rate? Is it more on a "status or collector's vehicle" than a "grocery getter"? At what point is the loss realized? When the automobile is damaged? Is it lessened by the quality of the repair? Is it payable when the vehicle is sold for the difference in value at the time?

The purpose of insurance is to return the policyholder to his/her pre-loss state, not to pay a profit.

If the vehicle is $20k pre-loss and is repaired using OEM parts by a factory certified technician, what's the diminished value? The customer has the car back in a pre-loss functional state. If we say there's $3000 worth of diminished value and the policy holder is paid that $3000 they have the car plus $3000. If they keep that car until it's near worthless then junk it they have the repaired car, 10+ years of use, and $3000. They've turned a profit based on an imagined devaluation of the vehicle.