Cars Have Changed; Why Haven’t Total-Loss Regulations?

By Greg Horn, Vice President of Industry Relations, Mitchell

The vehicles we drive today have become amazingly more complex over the last decade. Advanced electronics for traction control, anti-lock brakes and engine management are commonplace in vehicles we insure or repair. These computer modules can add thousands to the cost of a repair and may cause vehicles to unnecessarily total merely because a plug-in component is bad.

How many auto-claims managers have received that call about a heavy-hit car after the repairs were finished, only to find when re-setting the vehicle-electronic codes that a plug-in sensor or module was bad and pushed that car over the threshold. In some states, the only remedy is to total out the repaired vehicle, sell it with a salvage title and settle the vehicle as a total loss with the owner—who will likely be pretty steamed after all this time. Is it really right to total out a vehicle because of the cost of a plug-in piece of equipment?

Similarly, we see many cars that—because of fear of that unknown electrical/airbag/computer supplement—end up being declared total losses and causing a potential economic hardship on the vehicle owner, all in the name of following a state’s total-loss regulation.

Let’s face it, most states’ total-loss regulations were written when cars were less complex and it was easier to accurately estimate damages. Isn’t it time we looked at changing that? Recently the Nevada Collision Industry Association did just that—and I believe it will benefit the vehicle owner, insurer and the repairer. Simply put, the regulation “backs out” the cost of the electronic components when calculating the total-loss equation, aiming to put more cars back in the repair shop and ultimately in the vehicle owner’s garage. An interesting side benefit (and a major reason I believe the bill passed) is that repairing cars is good for a state’s economy. Early calculations indicate that the annual impact of sales taxes in Nevada paid on these higher-dollar-amount estimates that end up being repaired will be in excess of $800,000. Not to mention that the workforce implication of selling more parts and repairing more cars is likely to be equally as beneficial.

This is a well-crafted piece of legislation that does not take away the total-loss decision process from the insurer, but truly aims at repairing those cars that come close to the threshold primarily because of expensive electronics. Because it benefits all parties in the repair process, I encourage insurance and collision-repair lobbyists to look at Nevada NRS 487.790 to see if similar changes could be made to benefit your state.

Published in PropertyCasualty360°. January 9, 2012