Auto insurance is like homeowner’s insurance in that there are many insuring carriers competing for the right to insure high end property, however, policy coverage varies by insuring carrier and policy form options within a carrier’s offerings. There are many differences between the mass market auto policy and a private client policy, some of which are apparent on the declaration page of a policy and others that are slightly less obvious until the time of adjustment of a claim. Key differences in adjustment, valuation and repair processes should be weighed in addition to limits and pricing.
The objective of the adjustment process should be to determine if the automobile can be returned back to conditions prior to the accident in accordance with manufacturer’s safety specifications. A case study provided by Chubb Insurance Company highlights the differences in adjustment philosophy between the mass market insuring carrier’s approach and Chubb’s approach in valuation. Additionally, Chubb’s approach considered collateral damage for which there was no published manufacturer-approved repair technique.
A recent seminar sponsored by Chubb Insurance Company held at Insurance Institute for Highway Safety (IIHS) described some of the safety features of newer vehicles that are resulting in more complex repair and replacement. An LED headlight from a 2015 BMW 535i cost $1,922 while a 2018 BMW 540i cost $5,517. Additional features such as specialized engines with hybrid drive trains, adaptive cruise control and auto breaking sensors, multiple airbags, cameras and lightweight materials make the repair of seemingly minor accidents costly. In order to maintain structural integrity and safety features of the vehicle per manufacturer specifications, it is recommended that repair work be done by Certified Collision Repair Specialists. Certified Collision Repair Specialists utilize the automaker’s online Technical Information System which comes directly from the auto manufacturer and provides step by step instructions on how to conduct vehicle repairs while maintaining specific vehicle safety standards. It is important to note, that these systems are only available to repair shops that are certified with the auto manufacturers and as a result not all repair shops have access to the system. Additionally, private client carriers will pay for and insist on the use of Original Equipment Manufacturer (OEM) parts. OEM parts are designed for compatibility with the other components of the vehicle and the safety system. It is worth mentioning that the pressure to reduce costs on auto repair shops by some carriers can lead to dangerous corner cutting, that can drastically reduce the effectiveness of safety features in a vehicle.
One of the more straightforward differences in mass market versus private client insuring carriers is how the carrier will replace a vehicle if it is totaled. Mass markets provide an Actual Cash Value (ACV) while private client policies pay Agreed Value for the vehicle. This distinction is applicable to all vehicles, however, it becomes especially important when it comes to insuring older vehicles and collector vehicles that would be heavily depreciated in an ACV valuation.