Three speakers shared all of their unique perspectives about the impact of rising total loss claims at the Jan. 20 meeting from the Collision Industry Conference and explored what that means for the collision repair and salvage industries as well as, most importantly, consumer safety.
The topic was taught in CIC’s Industry Relations Committee, which compiled the panel. CCC Intelligent Solutions Quality Repair & Market Development V . p . Dan Risley said total losses have been increasing each year since 2013 with the exception of 2022 when losses fell slightly due to the value of used cars rising, which are equal to or outpacing the cost to repair.
Losses reached the greatest peak in 2022 at 20.6% because less traffic meant everyone was driving faster with more distractions, which resulted in harder impacts and higher severity, Risley said.
Claims data continues to suggest there are more higher-speed crashes as the number of airbag deployment has risen to 9% 2 yrs in a row in 2022 and 2022. The figure began increasing in March 2022 because the pandemic began when less people were driving and people who were on the road were going faster.
Drivers will also be keeping their cars longer with the average chronilogical age of vehicles on the highway at 11-12 years old and rising, according to CCC data.
When the COVID-19 pandemic hit, average prices of vehicles dropped and it has spiked month over month reflecting an outburst sought after while the supply chain continues to be constrained. “New cars are extremely difficult to find or becoming even more difficult to locate and used car prices continue to soar,” Risley said.
This point seemed to be raised in the meeting throughout a Parts & Materials Committee presentation when PartsTrader Chief Innovation Officer Greg Horn talked about area of the logistics issue to be the monthslong backlog of cargo ships off the coast of California. He said that despite imports from Taiwan decreasing by over 9%, the backlog at the Ports of Los Angeles and Long Beach remains a problem. Fines of $100 each day per container for not moving a container in the docks happen to be approved, but not implemented yet. Ships are anchoring farther from the port to help ease ship navigation.
Greater profitability on retail sales means fleet sales are going to have a hit – a trend Risley said he doesn’t see going away any time soon. Rental car information mill keeping their cars longer due to the cost of vehicles, which plays a role in less used cars in the supply chain and eventually will impact used parts availability.
The cost of labor and parts are outpacing the traditional Consumer Price Index of 6-7% making overall repairs higher. Total losses are 19-20%, Risley said. He speculated that total losses could be up because claim counts are down.
When total loss is mentioned many correlate it with the end of the vehicle’s life – it won’t be placed back on the road. However, Automotive Recyclers Association Executive Director Sandy Blalock and Auto Claim Specialists Managing Director Robert McDorman made it clear that’s incorrect. Some cars can be rebuilt safely but there are plenty that aren’t.
McDorman randomly selected 200 total loss states use to illustrate salvage vs. so-called clear titles. In the sample, 66.5% were titled as salvage and 19% remained in the client's name having a blue, or “clean,” title, often meaning they’re unbranded and indicate no damage. Most of them are unsafely rebuilt and sold.
As Blalock said, total loss threshold – the proportion where vehicles are deemed totaled by law – vary by state and never all states possess a threshold. And total loss isn’t always based on when the cost to correct the automobile exceeds its cash value. Sometimes, she said, it’s a total loss formula which is used quite often through the collision industry where the cost to correct and the actual salvage value that may be recouped exceeds the worth during the time of loss.
Insurance carriers, McDorman said, lead to keeping total loss vehicle repair estimates underneath the threshold so that the vehicles don’t get salvage titles.
“This really is multi-faceted,” McDorman said. “It’s a virus. It’s a problem and it’s a security problem. When these cars can be purchased at the salvage auction, licensed dealers buy these cars.”
He used claims in Texas as an example of a car that should’ve been totaled but was repaired and sold unbeknownst towards the new owner.
State Farm sold the 2022 Chevrolet Traverse LT at auction for $4,800 with a reported estimated repair cost of $14,345, that is a 75% damage ratio and allowed it to be sold with a clean title despite it being reported to CarFax like a total loss, according to McDorman's presentation. The repair estimate used by State Farm to deem the vehicle an overall total loss was really $18,970.01, McDorman said. If that value had been provided at auction, it wouldn’t happen to be sold having a clean title.
Blalock said she thinks 80-85% total loss threshold will be a “better working model.”
“After your day, we have to ensure that whatever we’re doing, and whatever laws are available, [we] are protecting consumers,” she said.
It’s vital that you realize too, Blalock said, that the definition of a salvage vehicle varies by state, there are in least 30 different definitions. Most significantly this means the vehicle was wrecked and damaged to begin the entire loss threshold. There also aren’t any restrictions on who are able to buy the vehicles. She defined a few practices that are a direct result might are of great concern for that safety of shoppers.
Curbstoning is definitely an illegal scheme to attract shoppers to a roadside or vacant lots and sell unfit cars without permits, licenses or mandated consumer protection. Oftentimes, individuals say the vehicles are their own personal cars but in reality they’ve been bought at auction, rebuilt – likely not using any OEM procedures – and set back on the highway.
Title washing is really a side effect of curbstoning, and Blalock called it a crisis in the U.S. Title washing means the real identities of vehicles are masked, for example by skipping the owner who didn’t sign the title and getting false documents to make a fraudulent title appear clean. Cloning, or utilizing a VIN from the legally registered car to cover the identity of the stolen or salvage vehicle, is also accustomed to sell cars that should’ve been marked salvage.
“Research shows that one in five vehicles are sold away from licensed dealer network,” Blalock said. “That’s 20%. And one out of every 325 vehicles on U.S. roads today might be operating on the fraudulent title. … Because enforcement resources are spread thin, it's up to car buyers to be informed, automotive dealers to be proactive, and municipalities to become responsive.”
McDorman said a lot of curbstoning might be prevented if insurance carriers was required to transfer the title to salvage title within 30 days.
One tool that may address the issue is invoking the appraisal clause. By doing so, consumers will discover from the third-party appraisal the value of their cars versus what insurers say they’re worth and provide to pay for.