Posts
A news item appeared this past week that demonstrates the importance of tracking and publicizing Salvaged and Rebuilt vehicles. I blogged on this subject on November 20, 2008 (National Motor Vehicle Title Information System as well as January 20, 2009 Used Cars – Salvaged and Rebuilt.
The CBS affiliate in San Diego, Channel 8 reported that a $15 million award was assessed against an auto body shop as a result of that shop rebuilding a salvaged pick up truck without replacing the air bags that deployed in the original accident that totaled the truck. As a result, an 18 year old man lost his life in a subsequent accident.
The article indicated that the air bags could have been replaced for as little as $2,000. But as I stated in the January 20th blog, in order to make a profit, corners must be cut and a $2,000 corner looks mighty appealing. Most consumers would not be aware of the bags missing nor should they be expected to.
The story first aired on January 22, 2009 and along with a very compelling video are available at:
Air Bag Fraud Leads To $15 Million Verdict
In another related story, a reader sent me a link to a Canadian National Television story on the accuracy of used car history reports with regard to damage history. This is very in depth nearly 18 minute story aired in Canada on January 19th and that can be seen at:
Canada's Investigative Consumer Show Market Place
Tuesday, January 27, 2009
Tuesday, January 20, 2009
Used Cars - Salvaged & Rebuilt
In Illinois we have four classifications of vehicle title. The first is unmarked or clean. After that a vehicle can be branded as Salvage, Rebuilt or Junk. Titles with Salvage or Junk branding cannot be plated and driven on the street. A Salvage vehicle can be repaired and upgraded to Rebuilt but a Junk Certificate cannot.
It is being reported by Carfax that in the United States, over five million (5,000,000) autos and trucks were written off by insurance companies as total loses in 2007. Further they are stating that over half of those vehicles are being rebuilt and returned to our highways. Think about that, over two and one-half million plus (2,500,000+) vehicles that an insurance company deemed total loses are being rebuilt.
Let’s look at the facts; first, what makes a vehicle a total loss? It is by insurance company standards. Rule of thumb is that if the damage (cost of repair) is equal to or greater than eighty percent (80%) of a vehicle’s retail value it is not repaired but sent to a junkyard. That may vary legally from State to State with at least one state that requires a repaired vehicle where repairs exceed eighty percent (80%) would receive a branded title even if it stays with the current owner.
Well, what is the price of salvage? Generally speaking, an insurance company believes it will be able to recover twenty percent (20%) in the salvage sale. Shrewd, why pay more than 80% in repairs when the company knows it can get 20%? And that makes perfectly good sense. Today, insurers are using salvage companies, such as Copart, that hold large scale auctions that they hope will increase the return on salvage units.
How does one make money by buying something for 20% of its value that will require 80% of its value to bring to pre-loss condition? Not to mention that in its repaired state it will not be worth its original value. The rebuilders have to do it by cutting corners. Since insurance companies are very cost conscience and consider every possible cost cutting procedure they can in order keep costs down, it is very difficult to find corners to cut. At least to cut them without reducing the value of the repaired car even more.
What I have seen happen is that the rebuilder straightens parts that should have been replaced, often times critical structural components that effect the crash worthiness of the vehicle. These “modifications” can effect the critical deployment of the airbags. That is if they have actually replaced the airbags and not just replaced cosmetic covers and removed lights.
Are these repairs so bad that the average person can readily see the problems? Not so much. I like to refer to these repairs as “beauty is skin deep, ugly goes all the way to the bone.” The paint shines and while there are usually many cosmetic problems a majority of consumers would never notice. Body lines aren’t good and it may not even go down the road straight. But unfortunately, the average person will not see the problems.
Additionally in Illinois a fleet operator, a company that operates over five (5) vehicles, such as a Rental Car Company, must apply for a salvage vehicle and go through the steps of bringing that vehicle to a Rebuilt classification if damage exceeds thirty-three percent (33 %) of its retail value.
Copart, the previously mentioned salvage auction company, has stated that over six hundred thousand (600,000) totaled vehicles have been retained by their original owners bypassing the Salvage/Rebuilt system. It is unclear whether this number was included in the Carfax numbers or not.
Finally, I have inspected too many vehicles that consumer’s brought to me with a Rebuilt Title that were not repaired safely.
So what can you do to protect yourself if you are buying a used car? In addition to Carfax, Autocheck also offers vehicle history reports online for a fee. If your car was previously registered in Illinois, the Secretary of State offers a free service to check the current branding of a Vehicle Identification Number (VIN). Go to http://www.ilsos.gov/regstatus/ and fill out the form. These services will only report known history and as the old saying goes, “garbage in, garbage out.” So after the known history is determined to be clean, get the potential purchase inspected.
It is being reported by Carfax that in the United States, over five million (5,000,000) autos and trucks were written off by insurance companies as total loses in 2007. Further they are stating that over half of those vehicles are being rebuilt and returned to our highways. Think about that, over two and one-half million plus (2,500,000+) vehicles that an insurance company deemed total loses are being rebuilt.
Let’s look at the facts; first, what makes a vehicle a total loss? It is by insurance company standards. Rule of thumb is that if the damage (cost of repair) is equal to or greater than eighty percent (80%) of a vehicle’s retail value it is not repaired but sent to a junkyard. That may vary legally from State to State with at least one state that requires a repaired vehicle where repairs exceed eighty percent (80%) would receive a branded title even if it stays with the current owner.
Well, what is the price of salvage? Generally speaking, an insurance company believes it will be able to recover twenty percent (20%) in the salvage sale. Shrewd, why pay more than 80% in repairs when the company knows it can get 20%? And that makes perfectly good sense. Today, insurers are using salvage companies, such as Copart, that hold large scale auctions that they hope will increase the return on salvage units.
How does one make money by buying something for 20% of its value that will require 80% of its value to bring to pre-loss condition? Not to mention that in its repaired state it will not be worth its original value. The rebuilders have to do it by cutting corners. Since insurance companies are very cost conscience and consider every possible cost cutting procedure they can in order keep costs down, it is very difficult to find corners to cut. At least to cut them without reducing the value of the repaired car even more.
What I have seen happen is that the rebuilder straightens parts that should have been replaced, often times critical structural components that effect the crash worthiness of the vehicle. These “modifications” can effect the critical deployment of the airbags. That is if they have actually replaced the airbags and not just replaced cosmetic covers and removed lights.
Are these repairs so bad that the average person can readily see the problems? Not so much. I like to refer to these repairs as “beauty is skin deep, ugly goes all the way to the bone.” The paint shines and while there are usually many cosmetic problems a majority of consumers would never notice. Body lines aren’t good and it may not even go down the road straight. But unfortunately, the average person will not see the problems.
Additionally in Illinois a fleet operator, a company that operates over five (5) vehicles, such as a Rental Car Company, must apply for a salvage vehicle and go through the steps of bringing that vehicle to a Rebuilt classification if damage exceeds thirty-three percent (33 %) of its retail value.
Copart, the previously mentioned salvage auction company, has stated that over six hundred thousand (600,000) totaled vehicles have been retained by their original owners bypassing the Salvage/Rebuilt system. It is unclear whether this number was included in the Carfax numbers or not.
Finally, I have inspected too many vehicles that consumer’s brought to me with a Rebuilt Title that were not repaired safely.
So what can you do to protect yourself if you are buying a used car? In addition to Carfax, Autocheck also offers vehicle history reports online for a fee. If your car was previously registered in Illinois, the Secretary of State offers a free service to check the current branding of a Vehicle Identification Number (VIN). Go to http://www.ilsos.gov/regstatus/ and fill out the form. These services will only report known history and as the old saying goes, “garbage in, garbage out.” So after the known history is determined to be clean, get the potential purchase inspected.
Monday, January 12, 2009
What If You Aren't Happy With Your Insurance Company's Offer?
You do have options when your company appears to be offering you less than what you think is fair in the settlement of your claim. Within your policy of insurance is a paragraph headlined as “Appraisal.” Commonly referred to as the “Appraisal Clause,” it is written into the contract to offer an insured, or the insurance company, the opportunity to settle disputes.
Although the actual verbiage will vary by insurance company contract, the Appraisal Clause generally follows this form:
If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. Each party will choose a competent appraiser. The two appraisers will choose an umpire. The appraisers will separately appraise the property and set the amount of the loss. If they cannot agree they will submit their differences to an umpire. An agreement by any two will set the amount of the loss. Each party will be responsible to pay for its own appraiser and will equally share the cost of the umpire should one be required.
It matters not whether “the amount of loss” refers to the cost to repair the property or the value of the property in the case of a total loss. By design it is intended to be a quick, cost efficient solution to disagreements between the two parties. And most of the time it does work just that way. However, some insurers may use it as a roadblock to delay settlement. In those unusual situations there is additional legal leverage that might come into play.
Although the actual verbiage will vary by insurance company contract, the Appraisal Clause generally follows this form:
If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. Each party will choose a competent appraiser. The two appraisers will choose an umpire. The appraisers will separately appraise the property and set the amount of the loss. If they cannot agree they will submit their differences to an umpire. An agreement by any two will set the amount of the loss. Each party will be responsible to pay for its own appraiser and will equally share the cost of the umpire should one be required.
It matters not whether “the amount of loss” refers to the cost to repair the property or the value of the property in the case of a total loss. By design it is intended to be a quick, cost efficient solution to disagreements between the two parties. And most of the time it does work just that way. However, some insurers may use it as a roadblock to delay settlement. In those unusual situations there is additional legal leverage that might come into play.
Tuesday, January 6, 2009
Steering Part II
There are numerous ways that insurance companies steer customers. What is common to all situations is that the personnel that you are dealing with are trained while you are inexperienced and expect them to help and take care of you.
One method is to tell the consumer that they have to go to a shop in its network or:
They will not get their vehicle repaired promptly.
Their repairs will not be warrantied.
They may be required to pay additional costs
Another method is by telling a consumer that “you can take your car anywhere you want for repairs, but you must take it to XYZ Autobody for an estimate.”
After the consumer gets an estimate from XYZ, the insurance company states they will pay no more since XYZ is “capable” of repairing the vehicle for its estimate.
Whatever the ruse the end result is the same; The consumer is pressured to go to a repair shop that offers the insurance company concessions or possibly made to pay out of pocket for quality repairs. Neither of which should be allowed and both of which are borderline illegal at best.
Bottom line: The insurance company is responsible for the proper and complete repair to the vehicle and the vehicle owner is entitled to go to the repair shop of their choice.
Good sources for additional information are available at:
www.yourvehicleyourchoice.com
as well as
www.stopsteering.com.
One method is to tell the consumer that they have to go to a shop in its network or:
They will not get their vehicle repaired promptly.
Their repairs will not be warrantied.
They may be required to pay additional costs
Another method is by telling a consumer that “you can take your car anywhere you want for repairs, but you must take it to XYZ Autobody for an estimate.”
After the consumer gets an estimate from XYZ, the insurance company states they will pay no more since XYZ is “capable” of repairing the vehicle for its estimate.
Whatever the ruse the end result is the same; The consumer is pressured to go to a repair shop that offers the insurance company concessions or possibly made to pay out of pocket for quality repairs. Neither of which should be allowed and both of which are borderline illegal at best.
Bottom line: The insurance company is responsible for the proper and complete repair to the vehicle and the vehicle owner is entitled to go to the repair shop of their choice.
Good sources for additional information are available at:
www.yourvehicleyourchoice.com
as well as
www.stopsteering.com.
Subscribe to:
Posts (Atom)