A flaw in the thinking of auto insurers

Source: carinsurancecomparison.com

Dear Editor

In 1999 or 2000, my mother, doing me a favour, hit my car against a stack of concrete blocks in our yard. That, until now, was the only time I claimed auto insurance.

Last month, my car was stationary behind another vehicle on Sir George Walter Highway. While we waited, a man who said he was distracted when another driver was too aggressively exiting a parking lot, rammed into my car, pushing it into the vehicle in front.

Being a relative novice, I asked for advice. ‘Get a value from a competent evaluator’ I was told. I also later got one from the actual shop that will be doing the repairs.

Despite being a novice, I am fully aware of the basic insurance principle that a claimant must not be left in a better position than he/she was in before a claim. Despite knowing that, I was shocked to find out that I was going to receive less than I was charged and less than it would cost to rent a car while mine was in the shop. The insurer considered three independent estimates – two I got done and one done by its adjuster. All three were in the same ballpark, signalling that the costs were neither over nor understated.

In other words, despite my car being stationary and another hitting mine from behind, I would end up having to find over an additional $1,000. Outrageous! I left in a huff; placed a couple of unsuccessful calls to my insurance company seeking advice; and called my wife to vent. When I calmed down a couple minutes later, I started thinking about that insurance principle and my wife called me informing that she had been on the phone with someone more experienced than either of us. She’d learned that that was exactly how the insurance industry operated.

In essence, car parts only have their full value when they are new. Any use at all devalues them. The lost value is called depreciation and is what insurers strive not to pay for. Additionally, insurance companies must make an assessment on whether they think the time estimated for the repair work is reasonable. It all sounds pretty logical to me, given that underlying principle that your car should not be made newer than it was before being damaged.

There’s one thing that the insurance formula completely overlooks, however: the fact that as soon as my car was rammed from behind, as soon as anyone’s vehicle is hit from any side for that matter, all the parts, even the ones not damaged in the incident, lose value. People would sooner buy never hit cars than ones rejuvenated with body filler.

I successfully argued that, because of the relative good condition of my car, the rate of depreciation on my damaged car parts was unjust. My claim cheque was increased by $400. In reality, however, I’m likely worse off by a couple thousand dollars.

There’s more still. The lost value doesn’t end with the idea that every part on my car – not just the damaged ones – went through rapid depreciation due to this accident.

Automakers use something called clear coat to protect paint and help keep cars looking shiny longer. It is like paint but without any pigment and, like paint, is applied in a specially controlled dust free environment resulting in a single seamless shield – a skin that, for a long time, keeps the paint unaffected by harmful sunlight, among other things.

When a car body has to be repaired, however, a seam forms between the new clear coat and the old, no matter how good the auto body repair guy is.

Several years after that incident with my mother and my first car, I kinked its hood. Like the guy who hit me last month, I, too, was distracted and I rear-ended someone. The repair guys did a great job, but some years later, their work began to show. While the factory applied clear coat remained intact, the add-on coat broke down starting at the seams and began to flake away. Isn’t that breakdown a result of the accident from several years prior and part of the lost value that, but for the accident, would not have occurred?

There is a flaw in the thinking of insurance companies.