The insurance total loss process is simply a racket! I am sick of reading emails from just about every corner of the country from people seeking some kind of consumer protection. It also seems that every insurance company is guilty as charged. Look, I make my living by dealing with insurance companies, and I truly believe in the societal need for insurance. However, when it comes to total loss claims, the consumer is getting the short end of the stick. Let me explain and I will let you form your own opinion.
The process is designed in such a way that the insurance carrier can make you take what they believe your car is worth. They decide this by finding comparable values in your area. These comparables are often assessed by independent third party companies. Insurance companies argue that they do not have any "control" over this information. However, I argued that this is not the case. The insurance total loss process is controlled and paid by the insurance company.
Who are these companies suppose to advocate for, the ultimate consumer or the person that pays them? Many people argue these companies are paid to act objectively, but in reality, they have few costumers
(big insurance carriers). If the insurance carrier believes that this companies total loss values are high, guess what? They will stop dealing with that specific company.
These third party companies are in business only because of insurance carriers. The consumer has no say regarding which third party company should look at their car. The result is simple. These companies must satisfy their client (the insurance carrier), and what is the best to do that? Low comparable values so the insurance company can settle you for less. Don't believe me? Simply Google "total loss class action".
You will see the amount of litigation for unfair vehicle values. There are ways to protect yourself when
disputing comparables and getting a fair settlement.
To learn how to dispute unfair total loss values, click here.
Offering less than the fair market value of your car is illegal. Insurance companies must be fair, but somehow they get away with very low total loss values. There are other insurance practices that are not illegal per se, but they are unfair an unethical. There are ways to fight those too!
The pressure of the total loss adjuster will be incredible; they want you to settle in the first call. Your car maintenance records will not be even considered. In many states, no new equipment will be looked at in
assessing the value. If you have rental coverage, most states allow the total loss adjuster to cut off your rental three days after the vehicle damage is deemed a total loss. Some states (like Texas) allow the insurance carrier to cut off your rental car the day they decide that there is a total loss. Note: not the day they pay. You are supposed to negotiate the value of your car while you either pay for a rental car out of your own pocket or you take the bus to work.
Cutting the rental car is in compliance with state legislation. Most states allow insurance companies to do this. Next time that insurance commissioner elections and/or your state legislators want initiatives, it is a good time to try to change this. Think about it, even if you settle your insurance total loss the day they call you, it will take at least three business days to get the check on the mail. You will not be compensated for any expenses while you go car shopping (it can take a long time).
Although the technique outline above is legal. I believe it is unfair. This gives unequal footing in a negotiation. Most people cannot afford to be paying for rental cars until they get to a settlement with an
insurance company. They need to get to work.
Insurance adjusters have a duty to act in good faith and fair dealing. It is implied in every insurance policy in the United States. However, this duty is "enhanced" when you are dealing with your own insurance
company. Insurance adjusters must "help you" and "explain" the process to you. They are supposed to explain how you can argue your claim, and how you can document the value of your car. Most will not. They will tell you "this is my last offer, let me know when you want to send me the title of your car, and I
will send you this amount." That is about it.
There is no question that we need insurance and that there is social benefit on having it. However, when it comes to the total loss process, some adjustments must be made to protect the ultimate consumer. Check you state regulations and see what this process entails. If you don't like it, then call your state legislator.
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