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03/19/2001
     
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Insurance Consumer Advocate Network
Calls for Uniform Title Branding Laws

Tempe, AZ 03/19/2001 - The Insurance Consumer Advocate Network, an InterNet based Consumer Advocacy Effort, has examined existing title branding laws and recommends uniform revisions. Existing "Loop Holes" leave Consumers vulnerable to predatory Title Branding Evasion Tactics.

PURPOSE: Title Branding Laws are intended to - [A] Keep unsafe or poorly repaired vehicles off our nations highways, and - [B] Provide Disclosure to potential buyers of a vehicle's significant collision history. Two admirable goals indeed. However, typical title branding statutes are inherently flawed in their structure allowing easy evasion of title branding requirements.

STRUCTURE: Typical Title Branding Statutes contain one of two triggering elements - [1] A Statutory Damage Threshold (example: 70% of pre-loss market value) and/or - [2] The claims handling phrase "Total Loss." When either of these elements provide the foundation for triggering title branding requirements the statute can be easily evaded.

EXAMPLE # 1: The Damage Threshold Trigger - A vehicle with a $20,000 pre-loss market value would be subject to title branding statutes if a repair estimate is written that exceeds $14,000 (assuming a 70% threshold). However, by creating an incomplete repair estimate at $13,000 the salvage vehicle could be sold with "Clean Paper" (un-branded title).

RESULT: [1] The Seller of the salvage vehicle (typically the insurance company) realizes a higher salvage recovery, and - [2] There is a Greater Probability that an unsafely repaired vehicle will be returned to our nations highways through victimization of an unsuspecting consumer.

EXAMPLE # 2: The "Total Loss" Trigger - As insurance companies "Steer" repair work to their "Partner" repair facilities, insurance companies become liable for the quality of those repairs. Over the past few years it has become increasingly common for insurance companies to "Buy Back" poorly repaired or dangerously unrepaired vehicles. Such "Buy Back" activities are extra-contractual as they arise out of the insurance company's implied warranty rather than any contractual (policy) obligations.

Insurance companies will typically exercise a "Buy Back" when the cost to re-repair a vehicle exceeds the net cost of a "Buy Back" less the projected recovery of reselling the vehicle with "Clean Paper."

In these "Buy Back" situations, insurance companies can evade title branding requirements because the initial claim had not been processed as a "Total Loss." It has also become increasingly common for such "Buy Backs" to be facilitated by third party entities such as the repairing shop or a direct salvage buyer. This way, the insurance company can maintain an "Arms-Length" relationship to the transaction.

RESULT: Poorly repaired, under-repaired and/or unsafe vehicles, with significant residual damage, are being reintroduced into the market place with no documentation as to any collision history.

REMEDY: The Insurance Consumer Advocate Network suggests regulators consider adopting a Two-Tier Title Branding Structure . . .

TIER # 1 - Repaired Vehicles with Verified Repair Cost . . . When a vehicle is repaired, where the final cost of repair reaches or surpasses a threshold of 50% of a vehicle's pre-loss market value (based upon a recognized used car price guide publication) the vehicle title should be branded as "Rebuilt".

TIER # 2 - UnRepaired Vehicles . . . When the cost to repair damage reaches a threshold of 50% of a vehicle's pre-loss market value (as defined above) but is not repaired OR when the resolution of an insurance claim for said damage precipitates a transfer of evidence of ownership of said vehicle, the title should be branded as "Salvage".

LOGISTICS: Administration of such a title branding law could be relatively simple. Whenever a repair facility or insurance company compiles, or becomes aware of, a repair estimate that meets the threshold of 50% of a vehicle's pre-loss market value (as defined above), the repair facility and/or insurance company would be obliged to notify the state's vehicle title issuing agency of the vehicle's VIN and projected repair cost.

The vehicle title issuing agency would then Flag that VIN as "Salvage". It would then be incumbent upon the vehicle owner to demonstrate to the vehicle title issuing agency that - [1] The damaged vehicle had been properly repaired at a cost below the 50% threshold. At that point the "Salvage" brand would be removed, or - [2] The damaged vehicle had been properly repaired at an amount that met the 50% threshold. At that point the "Salvage" brand would be converted to "Restored". If a change of ownership application is received on a VIN that is Flagged, any subsequently issued title would carry the permanent brand of "Salvage".

The Insurance Consumer Advocate Network is an InterNet based consumer advocacy effort designed to Increase Consumer Awareness as to Insurance Related Issues, Encourage Consumer Involvement with Insurance Related Efforts and Facilitate Consumer Contact with Pro-Consumer Entities.

The InterNet web site for the Insurance Consumer Advocate Network is www.iCan2000.com.


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