Insurance heads up

Roger M. Woodbury rmwoodbury at
Sat Dec 14 09:01:00 EST 2002

I would think that you would feel more pride of ownership, since insurance
was invented in the UK.  Just kidding!

I don't know how auto insurance is underwritten or regulated in the United
Kingdom, but in the US, insurance is regulated quite closely, and the
policies issued must conform to various regulations established by the
states in which they are issued.  In addition, anyone selling or servicing
the policy must be licensed as well.  In addition to that, most
jurisdictions have quite strict regulations concerning the time that may
pass before the claim is settled.  The attempt is that insurance companies
will provide the services that they intend to provide in issuing the
contract to begin with.

Now, before I hear any more screams of rage about how this or that insurance
company screwed me because of a health insurance it:  life,
accident and health insurance are not subject of this discussion, and in the
main, don't even write health or life insurance as a main stream of what
they do.  There are exceptions, but the majority of first line life
insurors, don't underwrite group or health insurance, and the majority of
first line automobile insurors are not in the health insurance business,
either.  My line of commentary is strictly involved with auto insurance.  I
will agree at the outset, that health and to a lesser extent, life insurance
is a nasty game full of politicians and other cheats and liars.

The statement that fighting for another $1,000 "you are in for months of
pain", just isn't true here in this country.  The issue as presented here,
was one of unquestionable liability on the part of the "other" insurance
company, and the ONLY question was the method of valuation AND the ultimate
valuation of the destroyed vehicle, PERIOD.  It is VERY open and shut.

Actual Cash Value isn't a phantom term.  It is an integral part of every
property insurance policy issued in this country, in large measure.  As a
definition of coverage ACV is very well documented in law, and establishing
it, and how it is to be applied to a loss, is very clear cut.  Most
claimants are not lawyers or insurance agents, and have not been properly
serviced by their insurance agent to begin with.  With regard to auto
insurance, this is most often the choice made by the customer:  they want
the cheapest insurance that they can get so that they can get their car
licensed, and the bank satisfied.  In theory this should be fine, as auto
insurance is one of the least complicated forms of general insurance
purchased by the consumer.

What auto insurance isn't, is closely underwritten, and to large measure,
individually underwritten.  Think about it:  how could an insurance company
spend the money necessary to underwrite each policy?  Here is how it works:
a policy application is received.  The vehicle is checked against a list of
vehicles that are underwritable by the company, then the age, sex, and
address of the applicant.  That's basically the first hurdle.

Next, the driver's record of the applicant is pulled from the motor vehicle
department according to the driver's license number furnished on the
application.  That's basically the next hurdle.  If the record falls within
the underwriting guidelines of the company, then the application will go to
the next stage.

The next step will be to pull the credit rating the applicant. It may well
be that the insurance company will order more information but it is likely
that this is the entire process at this point.  Either coverage is issued or
it isn't.  Total premiuim....say....$800 a year, per vehicle on the

Now, much of this process is computerized at this point, once the
application is received.  But the person who is supervising the underwriting
process earns $23,500 per year, plus benefits package, for a total of
$27,355. in annual compensation.  The insurance company pays a final amount
of 13.5 percent to the agent in comissions.

When the policy is issued, on the effective date of the coverage, the
insurance company has guaranteed a maximum liability of, say, $300,000 in
personal injury and property damage, and a total loss potential of $17,000
on the vehicle, plus the cost of towing it, and probably other coverages as
well.  Don't forget that the insurance company will also defend you in the
case of a personal liability loss, and those legal expenses aren't even a
factor in the basic cost of insurance.

I am sure that everyone sees the point:  for a lousy X dollars a year of
premium, there really is quite an astounding amount of coverage in various
forms provided under the contract.  So much for the theory.

Most losses involving automobiles do not involve personal injury, but are
the smaller, property damage variety,a nd that is where most people come to
"hate" insurance companies, because most people ALWAYS overinflate their
idea about what THEIR car is worth.  This is especially true in the US,
where we have come to regard our automobiles as an extension of our basic
freedoms (which in my opinion is really confused prioritizing).

I think that everyone who knows what an automobile is, will agree that from
the moment the vehicle is driven off the assembly line, it gets
older....don't we all?  Now, an automobile may have a finite life span which
can be extended by maintenance, but I doubt that anyone will say with a
straight face, that the car they drive does not decline in value with each
mile.  Ultimately, the old clunker is just not "worth" anything, even though
it may be able to continue to provide satisfactory transportation.

Now, the basic purpose of automobile insurance, and insurance in general, is
simply "to make the loss whole".  Everyone who owns property, in order to
make the "risk" acceptable to the insurance company, assumes some of the
risk of owning and operating the vehicle.  This "risk" acceptance is the
deductible for physical damage to the vehicle.

In the basic "fender bender", the insurance company will adjust the loss.
They will assign an adjuster to verfy the loss, pull the police report, and
negotiate the final repair cost of the damage with the body shop.  The
amount of estimate of loss was $2300, and the adjuster brings the price of
the repair down to $1750 in negotiation with the body shop, and after $250
deductible, the car is repaired.  Loss made whole?  You betcha.

Now in the case of the total loss, the insurance adjuster has opened his
"book"....which is probably not the NADA Guide available on-line, or in the
book stores, nor the Kelly Blue Book so commonly available on-line either.
Rather the adjuster's "book" is furnished by one of a whole slew of services
that compile auto resale data in great detail and furnish this data to
insurance companies for a fee or subscription.  Think of an insurance
company as a gigantic sort of information sponge, and insurance companies
must constantly try to keep apace of the cost of living, in order to remain
in the market place.  About fifteen years ago or so, USAA Insurance formed
an entire company to provide a buying service to its members so that it
could reduce the cost of claims.  When my cameras were stolen on a beach in
Venezuela, they didn't send me a check for their value.  Rather they just
replaced the lost lenses and camera body.  Worked for me, and probably cut
their cost of doing business.

So, now we have a totalled Mazda 323, and the actual cash value of that car,
with 200,000 miles is STATISTICALLY $300.  That's the offer from the
insurance company.  It is NOT an edict from God.

Now, this particular vehicle was the subject of extensive restoration,
including a professionally installed "crate" engine, with all assorted hoses
and mounts etc, etc, renewed at the same time.  All of that work is, say
within the past ten thousand miles, and well documented.

Remember, the insurance company issued a contract of insurance on THAT
particular car, identified by its vehicle identification number.  Therfore,
any total loss situation MUST involve data pertaining ONLY to THAT
particular car.  The statistically ACV can serve only as a guideline, but
that particular car was insured, and therefore any loss must be adjusted on
the basis of that car.

The ACV of the loss cannot be determined by the adjuster....well, check
that:  It CAN be determined by the adjuster IF the policy holder is willing
to allow the adjuster to do that.  But in this case, the adjustment seem
unfairly low, and the job is to verify the adjuster's valuation.

Now the adjuster is probably a very fine fellow, and perhaps is very
knowledgable about his business, but he may not be an expert in the
marketing of used Mazdas.  Hence, the process that needs to be undertaken by
the claimant, is to find out from those people who ARE experts in the
marketing of Mazdas, what the Actual Cash Value of that particular Mazda is,
right now, today, in full fit form ready to be driven off their used car

Most professional used or new car dealers will be happy to give the claimant
a good value of that car.  It has nothing to do with whether or not they
would actually keep such a car on their lots....probably they wouldn't, and
would just wholesale the car off as quickly as possible....but what is
needed here is merely a theoretical figure to use for insurance purposes.
By getting that figure from several professional sources, the true Actual
Cash Value of the vehicle can be obtained, in writing, and the true value of
the loss provided to the insurance company.

If there are three different statements of value from automobile retailers
that prove the value to be between, say $1500 and $1900, then the insurance
company will make a settlement on the basis of those figures.  It is highly
unlikely that the insurance company will completely ignore such
documentation, and invite a day in small claims court, or worse case, a
complaint from the insurance commission of the state, or worse still, a suit
filed by an attorney.

If the insurance company refuses to pay an ACV loss on this magnitude, and
does invite further legal action, then there is another decision making
process to go through....and one more thing learned:  the claimant will now
know the name of one insurance company that he/she surely doesn't want to do
buisness with any more.

The final question is, is it worth persuing for a "lousy" thousand bucks or
so?  I suppose if one is a multimillionaire and spends that much for lunch
three times a week, the answer is "no".  But were it me, the idea of
spending a couple of hours tire kicking and talking with sales managers in
auto dealerships to get paid a "lousy" thousand bucks, is time well spent.

(No longer the insurance guy, because I know where too many skeletons are
----- Original Message -----
From: "haydn taylor" <haydn_taylor at>
To: "Roger M. Woodbury" <rmwoodbury at>; <armanmik at>
Cc: <quattro at>
Sent: Friday, December 13, 2002 7:35 PM
Subject: Re: Insurance heads up

> I have had 2 experiences like this in the past (both in the UK) and got
> raped both times,  Think long and hard if you want the pain in youre life
> right now to deal with fighting the insurance company for the sake of
> another $1000. You are in for months of pain!!!
> I had a 1964 Volvo Amazon 123GT, thgat was immaculate. I paid 3000.00GBP
> it, then put about another 3K GBP into it, so it had a value to me of
> $9K USD. It was appraised at about that by Volvo UK, and the Volvo Owners
> Club, I had all the reciepts and a years worth of clippings from local and
> national magazines (the car had been featured in several). I got rear
> by a Joy rider. the insurance company offered me 300.00 GBP as per the
> book value. I fought them for a year and a half to no avail.
> Case 2 - I had an ex-works 1979 (I think), Chrysler Sunbeam TI Rally Car,
> with full factory documentation and a full life history of racing. A
> of mine was driving it, was forced off the road into a ditch where a tree
> growing out of the banmk at 45 degrees attempted to peel the roof off,
> thankfully there was a full FIA cage in it that got crushed to the point
> that it pinned my friends head to the head rest. - the insurance company
> managed to get out of paying anything at all as the crash happened on a
> public highway (it was on a 2 mile long stretch of private road.)
> Case 3 - Suzuki GSXR - stolen from outside my house one night, found in a
> field 2 months later totalled (the thief had chiseled the lock, and
> apparently the chisel came out at speed during cornering and the steering
> lock came on - hope he was badly hurt!) - insurance company paid out
> $400.00, from which I had to pay 200 to get it back!
> etc. etc. etc.
> Insurance companies write thier own laws and its very hard to argue with
> them.. what really pisses me off is that we all pay thier ripoff rates
> year, and they go up every year (despite no claims), then when something
> like 911 happens they cry that they cant afford to cough up and that the
> risk of terrorism is too high for them to cover. So the US Govt caves in
> gives the thieving bastards a bunch more of our hard earned money - they
> it both ways and we lose out.
> sorry for the rant but.....I HATE INSURANCE COMPANIES! (in case you
> tell)
> Timmmy
> 5ktqs
> ----- Original Message -----
> From: "Roger M. Woodbury" <rmwoodbury at>
> To: <armanmik at>
> Cc: <quattro at>
> Sent: Friday, December 13, 2002 5:43 PM
> Subject: Re: Insurance heads up
> > Now, wait a minute.  You are a long way from done.  Just because some
> > insurance adjuster yahoo SAYS that ACV is some-such, doesn't make it so.
> >
> > Actual Cash Value is the real dollar value that that car will bring in
> > town or area in which is was principally garaged, and the rating
> > that was a factor in the rating of the vehicle to begin with.
> >
> > What you need to do is to prove the insurance adjuster wrong....or
> perhaps,
> > prove him right.  Here is how you should go about it.
> >
> > First of all, go to an authorized Mazda dealer.  If you have a recent
> > picture of the car, AND all records for all the work done on the car,
> > them with you.  If you have records for maintenance on the car since it
> was
> > new, or newer, take them too.  The more pictures you have the better.
> >
> > Ask the dealer what THAT car would be worth, theoretically, at retail
> > (Actual Cash Value!), if it was sitting on his lot.
> >
> > Repeat the exercise at two other dealerships in town, or the local
> shopping
> > area.
> >
> > Be straight with the dealers.  Explain that your wife has just survived
> > total loss accident in THAT car.  Tell them that when she gets out of
> > hospital, she will need new transportation (hence going to the Mazda
> dealer
> > to begin with, of course).  Tell them that the insurance adjuster is
> giving
> > you what you think is an unfair valuation, as the car was in much better
> > than "average" condition.  Provide as much detail as you can.
> >
> > The three dealers should be willing to give you a statement in writing.
> It
> > doesn't have to be something that will withstand a Supreme Court
> Challenge.
> > It is only important that the dealer, authorized Mazda or someone else,
> has
> > stated in writing, that on the basis of the information and
> > that you have provided, the Actual Cash Value (ask the dealer to use
> > words!), of that car on his lot would have been "X" dollars.
> >
> > You may be surprised at what the Actual Cash Value may be or it
> may
> > not be better than you have been offered, but by all means, do NOT
> > accept what has been told you by the insurance company adjuster.  I
> > that he has done more than look up the value in the "books".
> >
> > I was in the insurance agency business for a lot of years, and I can
> > you, that that Mazda poses difficult considerations.  Its age, mileage
> > model make it an automatic write-off, as far as the insurance company is
> > concerned, because most that age are really worth very, very little.
> > they will gladly provide a better settlement to you, IF you can prove
> > they should.
> >
> > A client of mine once had a VW Bus that was very old.  He had a lot of
> work
> > done on the engine and electrical system, as well as extensive body
> > He had recent receipts for more than $1900.  The bus was stolen and
> torched,
> > and the insurance company offered him $300 which was exactly book
> > that case, NADA Blue Book, which was what was most commonly
> > used.
> >
> > He did exactly what I told him to do, and the valuations from three
> dealers
> > in town (there were NO VW dealers, by the way), appraised the records
> > pictures of the bus at between$1800 and 2500.  My client got the $1900
> that
> > he had put into the bus over the previous six months, AFTER deductible.
> >
> > Let me know what happens, if you would, and also, I would love to know
> > name of the insurance company involved.
> >
> > Roger
> >
> > (Mercifully out of the insurance biz for twelve years).
> >
> ---
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