When it comes to insurance claims, policyholders in many cases are met with a “take it or leave it” approach from insurers on valuations of the vehicles and also the damage to them, but appraisal experts say repairers can step in to assist.
After an accident, Denver7 reported consumers may find out their older cars are worth more due to the skyrocketing value of used cars right now. That’s only one example of why insurers might total a vehicle instead of repairing it.
“Because the used car market has grown, that’s obviously a bigger pool of funds to correct the vehicles,” said Steve Krieps, a public adjuster with Collision Safety Consultants of WV. Previously two years, he explained it’s been a “huge issue” because, due to higher salvage values, insurers want to total an automobile within total loss threshold or by using the incorrect values. “But yet, if you use the brand new value and the total loss threshold then the car was really repairable.”
ZB Claim Services, Inc. Client Services President John Walczuk said throughout a 2022 SEMA Show class in November that even if a car winds up deemed an overall total loss, shops can help guide insureds through the process resulting in them likely coming back for repairs the next time they need them due to the trust built in the shop.
“Your job is to basically stop that individual from signing the title on day one and to at least seek some counsel relevant to the worth,” he said. “Should you help a person to get more money – you’re there to coach them through a situation – most likely they’ll come back to you in the future. They obtain a dent within their car, they’re not going to go to the guy across the street. They’re going to come to you.”
Shops will also help potential future customers by referring them to Walczuk or any other professionals that may review valuation reports and see if they’re owed more money by their insurer, or maybe there’s a way to challenge a total loss determination. One way for customers to do this, which could result in their vehicle remaining repairable, is to invoke the appraisal clause. Every state doesn’t require insurers to achieve the clause within their policies, and people who do, don’t have the ability to the same total loss thresholds. In some states, carriers have attempted to take away the appraisal clause using their policy – a move that may allow it to be more difficult for customers to challenge ineffective settlements on repairs or compromise repair quality, Walczuk said. Other states, such as with recent legislation in Sc and Washington, want to require the appraisal clause being an option for their constituents.
During a class at SEMA 2022, Auto Claim Specialists Md Robert McDorman said there are only two ways cars can be deemed a total loss.
“It’s either the total loss threshold or the total loss formula . When a carrier tells you that they will deem an automobile an economic total loss they use the entire loss formula every single time.”
The total loss formula is calculated by utilizing “the salvage value plus the repair cost [and if it’s] more than the particular cash value they have the to deem the automobile an overall total loss,” he said. In states where a total loss threshold is mandated, that’s used rather than the TLF, according to McDorman.
However, some insurance plans hold companies to spend the ACV, and consumers can invoke the appraisal induce to obtain a third party to challenge vehicle valuations that don’t align with comparable replacement vehicles they’re finding in the marketplace.
“The carriers will send out their estimator,” he said. “They’ll write a quote then you have little or no recourse to combat that when they dig their heels in and say, ‘This really is all we’re going to pay.'”
Low valuations often lead to total losses on vehicles that could’ve been fixed. Insurers will total vehicles with the reasoning that salvage values are high, he explained.
“What’s the salvage value got to use this? Absolutely nothing,” McDorman said. “Until someone holds the carrier accountable, they’re going to continue doing this. They’re just likely to continue to make these wrongful calls and harm your visitors.”
He added that the “fence post” from the claim may be the actual cash value, but insurance policies dictate what happens; most of which the companies can total vehicles for whatever amount they determine. Ultimately, the insurer’s obligation is to result in the consumer whole. Shops and policyholders should always make certain insurers are following their own policies, McDorman said.
“Transparency is what’s likely to fix this issue. Without transparency and without [consumers] fighting, standing up for [their] rights, it’s just getting worse.”
Krieps said he’s seen claims where wrecked vehicles regarded as possible total losses after a preliminary look were taken right to a salvage yard, sometimes with no owner’s consent.
“The harm appraisals that are appearing out of those situations are low enough to where it’s returning from salvage as repairable and then once it hits a store, now all of sudden it is going back into the total loss threshold,” he explained.
Krieps offered the following advice for repairers:
- Know what your state regulations are and let your customers know how they can find them. However, avoid interpreting the laws for them, because that may get repairers in legal trouble, he said.
- Tell customers to get a copy of their insurance plan so they’ll understand what they’re owed. He said lots of people haven't seen the actual language of the policy.
- Contact professionals, such as the independent appraisal firms featured within this story to ask questions. Most don’t charge for general discussion.
- In general, when giving advice to customers, consult with your shop attorney to make sure you’re not doing anything improper.
“The right to appraisal has turned into a consumer’s only option in some cases and litigation can be costly and time-consuming,” Krieps said. “Many states are now understanding that the appraisal provision can help remove cases in the courts that could be handled through the appraisal process. At the same time, lots of insurers appear to be racing to remove this provision which may leave consumers with a take it or let it rest policy.”
It’s essential for proprietors to obtain valuation reports from their insurers to check out the numbers firsthand because insurers like to hide behind estimating systems and evaluation services when there’s an overall total loss, Walczuk said. He complained that the samples utilized by estimating systems are, at least, 3 months old and therefore are rarely similar to the vehicle in question, which could allow it to be challenging for a consumer to find a replacement vehicle for the offered valuation. When the valuation report doesn’t seem sensible, the likes of Walczuk’s will end up the power of attorney and pursue the insurance company.
From what Walczuk has seen, 80-90% of cars deemed totaled are 20% or even more below what their actual value is and the make and year don’t make a difference. Vehicles valued under $50,000 are undervalued by 25-30% and those above $50,000 are undervalued by 10-15%, which can visit between $5,000 and $30,000 underneath the ACV, he said.
McDorman provided data to Repairer Driven News this past year from more than 700 Texas total loss appraisal clause proceedings that show insurer estimates of customer vehicle values were, on average, around $3,500 lacking.
Insurance companies putting valuations on vehicles at much lower amounts than their current ACVs has been a problem for quite a while, according to Krieps.
“It’s being used almost as a tool to lower claims payout,” he explained. “A minimum of that’s the way it appears. …Right now, with salvage values being up, if they’re able to total a car for a lower value and then recoup more about the salvage side … then obviously that’s a huge help to a carrier; less to an insured.”