I-Can Warns Consumers About
Tempe, AZ (11/11/99) - The Insurance Consumer Advocate Network ("I-Can"), an Internet-based insurance consumer advocacy effort, is warning motorists about an auto insurance policy revision being filed with the Departments of Insurance in various states. The Insurance Services Office (ISO) is in the process of making these filings on behalf of the auto insurance companies they represent. These new policies will specifically exclude coverage for the post-repair Diminished Value of insured' vehicles.
New Auto Policy Changes
Diminished Value is the reduction in resale value a vehicle suffers when it has a history of significant damage. Optimum repair quality results in minimal Diminished Value. Substandard repairs result in increased Diminished Value (more than double, according to I-Can consumer surveys).
The prospect of having to pay for additional Diminished Value on vehicles that have received inferior repairs has been a leverage pro-consumer body shops have used to encourage less-than-ethical insurance companies to pay for thorough and proper repairs. The CCRE, a national coalition of pro-consumer body shops, has been informing consumers about their right to collect Diminished Value for several years. Now it appears that many auto insurance companies would rather diminish the policyholder's rights than pay for proper repairs.
Jeff Albright, Executive Vice-president of the Independent Insurance Agents of Louisiana, has cautioned the Louisiana Department of Insurance to carefully study the market value issues and the impact on policyholders. Mr. Albright states "One good example of a significant Diminished Value loss would be common in flood damage claims. We are aware of several instances where a vehicle has been submerged during a flood. The entire electrical system has experienced both current and potential damage. Instead of the insurance company declaring the vehicle a 'Total Loss' they would replace defective components to restore current function. This work is usually done at a dealership that identifies the vehicle as being 'Flood Damaged' on a nationwide data base. The resale value of that vehicle immediately plummets to pennies on the dollar".
According to Chris O'Hara, an attorney with Hagens, Berman & Mitchell in Phoenix, Arizona, "For most people, an automobile is their second most significant financial commitment. When they purchase insurance on that vehicle they expect they are protected against catastrophic loss of value". Mr. O'Hara goes on to say "Removing the obligation to restore the vehicle to its pre-loss value would, in effect, void the policy".
Both I-Can and the CCRE have taken a proactive stand in opposition to insurer fraud and encourage consumers to express their feelings about this matter to their legislators and Departments of Insurance.
State Departments of Insurance can be accessed online by clicking here, followed by scrolling to and clicking on the listing for your state.