Auto insurers need to do more for their policy holders when a total loss is declared.
This article clearly shows that in many cases they can and should.
KP: can you advise what insurers should do to “do more” as you indicated for their policy holders when a total loss is declared? Not criticizing, but am very curious…thank you..
I would say that if the vehicle when recovered is a total loss, that they obtain a salvage title before selling it off so that is on the record of the VIN is good way to start.
I’m not sure there is much that can be done with an example like Mr. Leon. He still owed $13k on his 2013 Kia after his settlement? Clearly, he got hammered on the deal he made. Insurance companies insure vehicles, not bad loans.
The ACV (actual cash value) of the vehicle is not directly related to the salvage value of the vehicle. The salvage value is a factor in determining a “constructive total loss,” (whether it makes economic sense to total the vehicle), but not an actual total loss (a vehicle that cannot be repaired). This article mixes things up quite a bit. In the last example, they went 3rd party instead of using their collision coverage. They didn’t pay a deductible, but the ACV should have been the same whether they went 1st or 3rd. They were upside down on their loan and had the misfortune to have an accident. The increased salvage recoveries work to keep the net payout lower for carriers which is a good thing since rates are largely driven by loss costs.
The bigger problem with valuation is that car owners always feel like their car is worth more than its really worth. They want it valued for its intrinsic value but the cold hard truth is that the car is never really ever worth that much. This causes the friction.
The technology driven complexity of modern automobiles is far outpacing the availability of qualified autobody technicians who can fix the cars. For this reason alone, insurers might be compelled to “total” cars which by historical metrics should have been repaired.
Agree. We’re finding that certain models will bring much higher salvage payouts, depending on location of damage. By the time the company pays the total loss and backs out the salvage value, the company’s net claims cost is about the same or only slightly higher than the cost to repair. By totaling the vehicle they remove the potential problems with the repair, rental reimbursement, and some other headaches. No doubt that some clients, especially those with upside down loans, would prefer a repair.
The $900 Billion Auto Aftermarket: Where Total Losses Turn Into Big Gains.
There will always be vehicles that don’t have any salvage value but the story clearly indicates that many others do have significant salvage value and the insurer should take that into consideration when determining the salvage value payout to the policy holder.
As a former State Farm Auto Adjuster, the carrier will always do whatever is less for them: repair the vehicle or replace the vehicle. An early claim in 1985 saw an elderly woman hit a tree and total a new Chrysler. The husband and wife were first upset at State Farm, as the loan balance payoff far outweighed the ACV / Actual Cash Value of the vehicle. But I was able to turn their anger to the salesman and dealership, who had them upside-down in the car before they drove off the lot (with double digit percent percentage interest rates in the 1980s for financing the vehicle). However, carriers (and Agents & Brokers) should offer “gap” coverage, which should pay the difference between the payoff to the Lienholder and the ACV or Actual Cash Value (and don’t forget that, often, the Poicyholder must also pay their Collision Deductible, thus leaving them with an even bigger “gap” to bridge). It could be an E & O exposure to not offer “gap” coverage if it was available at the time the Policy was sold but wasn’t offered.
Auto insurers need to do more for their policy holders when a total loss is declared.
This article clearly shows that in many cases they can and should.
KP: can you advise what insurers should do to “do more” as you indicated for their policy holders when a total loss is declared? Not criticizing, but am very curious…thank you..
I would say that if the vehicle when recovered is a total loss, that they obtain a salvage title before selling it off so that is on the record of the VIN is good way to start.
I’m not sure there is much that can be done with an example like Mr. Leon. He still owed $13k on his 2013 Kia after his settlement? Clearly, he got hammered on the deal he made. Insurance companies insure vehicles, not bad loans.
The ACV (actual cash value) of the vehicle is not directly related to the salvage value of the vehicle. The salvage value is a factor in determining a “constructive total loss,” (whether it makes economic sense to total the vehicle), but not an actual total loss (a vehicle that cannot be repaired). This article mixes things up quite a bit. In the last example, they went 3rd party instead of using their collision coverage. They didn’t pay a deductible, but the ACV should have been the same whether they went 1st or 3rd. They were upside down on their loan and had the misfortune to have an accident. The increased salvage recoveries work to keep the net payout lower for carriers which is a good thing since rates are largely driven by loss costs.
The bigger problem with valuation is that car owners always feel like their car is worth more than its really worth. They want it valued for its intrinsic value but the cold hard truth is that the car is never really ever worth that much. This causes the friction.
The technology driven complexity of modern automobiles is far outpacing the availability of qualified autobody technicians who can fix the cars. For this reason alone, insurers might be compelled to “total” cars which by historical metrics should have been repaired.
Agree. We’re finding that certain models will bring much higher salvage payouts, depending on location of damage. By the time the company pays the total loss and backs out the salvage value, the company’s net claims cost is about the same or only slightly higher than the cost to repair. By totaling the vehicle they remove the potential problems with the repair, rental reimbursement, and some other headaches. No doubt that some clients, especially those with upside down loans, would prefer a repair.
The $900 Billion Auto Aftermarket: Where Total Losses Turn Into Big Gains.
There will always be vehicles that don’t have any salvage value but the story clearly indicates that many others do have significant salvage value and the insurer should take that into consideration when determining the salvage value payout to the policy holder.
Just my opinion
As a former State Farm Auto Adjuster, the carrier will always do whatever is less for them: repair the vehicle or replace the vehicle. An early claim in 1985 saw an elderly woman hit a tree and total a new Chrysler. The husband and wife were first upset at State Farm, as the loan balance payoff far outweighed the ACV / Actual Cash Value of the vehicle. But I was able to turn their anger to the salesman and dealership, who had them upside-down in the car before they drove off the lot (with double digit percent percentage interest rates in the 1980s for financing the vehicle). However, carriers (and Agents & Brokers) should offer “gap” coverage, which should pay the difference between the payoff to the Lienholder and the ACV or Actual Cash Value (and don’t forget that, often, the Poicyholder must also pay their Collision Deductible, thus leaving them with an even bigger “gap” to bridge). It could be an E & O exposure to not offer “gap” coverage if it was available at the time the Policy was sold but wasn’t offered.
I’m wondering why the gap coverage in the article didn’t make him even close to whole?