By Anne Holtzman
Due to economic variations and market changes, the national marketplace has seen an increase in total losses resulting from auto accidents, with ADESA Analytical Services reporting the percentage of insurance claims resulting in total loss has risen from 15.6% in 2015 to 16.9% in 2016.
Improved employment, inexpensive gas prices and mobile lifestyles have led to people driving faster, longer and more often. As a result, vehicle values are rapidly depreciating while loan amounts and term lengths are increasing. Average loan amounts for new and used vehicles were at record high at the end of last year, with many loans having terms lasting as long as 72-84 months. Rapid depreciation combined with lengthy loan terms result in higher loan to value ratios.
An increase in drivers on the road has led to an increase in reported accidents. In 2015 alone, there were approximately 6.3 million police-reported crashes. And, with the added bonus of having distracted drivers on the road, the severity of accidents has also been rising like never before. Last year, as many as 40,000 people died in motor vehicle crashes – a 6% rise from 2015.
An increase in auto accidents combined with higher loan to value ratios has resulted in an exponential increase in total loss accidents.
Total Loss Claims
Many insurance carriers are now regularly utilizing automated tools to settle accident claims. The market assessments performed by these tools often increase the amount of deductions taken out, leaving the insured with a devalued vehicle or total loss by as much as 35% in some cases. These deductions might benefit insurers by saving on claim costs, but the practice results in greater potential for GAP claims and losses for lenders.
Take Action
The key to reducing the amount or severity of total loss accident claims is to help your borrowers to negotiate the insurance settlement. Every single settlement an insurance carrier submits can be negotiated.
Educate Your Loan Staff and Borrowers
Many borrowers don’t know they are within their rights to negotiate insurance settlements. If you inform them about their right to negotiate at the onset of their loan know loss settlements, they will be much more likely to do so.
Perform Your Own Valuation
Performing your own evaluation of the actual retail cash value of the vehicle will enable you to verify the accuracy of the insurance’s loss claim and arm your borrowers with better tools to negotiate with their insurance companies.
Verify Your Vehicle Specs
Maintaining copies of the dealer spec sheets for all of your direct and indirect loans will enable you to verify or negate the history, mileage, and condition of the vehicle. Negotiating these specs with insurance companies can increase the vehicle’s determined value.
Performing these tasks can help your business recover lost dollars from undervalued claims, while protecting your GAP program. Not only will this benefit your bottom line, but it will also bring incredible value to your borrowers by helping many of them to collect money that they could have missed out on.
Watch the recording of our August 24 webinar on managing total loss risk to learn more at http://bit.ly/2urEjMG.
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Anne Holtzman serves as Senior Vice President, Claim & Recovery at Allied Solutions. In this role she is responsible for internal product development and identifying and developing partner vendor strategies that serve to provide risk management solutions to all facets of lending institutions. She has over 25 years of experience in the insurance industry, serving in various executive level positions for both the personal lines automobile insurance industry and now in a service support role for financial intuition clients. Anne has strong recovery expertise in areas of repossession, total loss, and GAP claim adjudication.