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5 myths about car insurance claims

Lori Johnston

When filing a car insurance claim, some folks might mimic the Rolling Stones and sing, “I can’t get no satisfaction.”

Long waits for repairs, out-of-pocket costs and other unexpected issues can cause dissatisfaction with the car insurance claims process.

Reality hits when consumers receive service and settlements that don’t live up to promises made in advertisements or that don’t meet expectations for consumers filing a claim for the first time.

Car insurers and industry researchers keep a close watch on claims satisfaction because unhappy clients can cancel or not renew their policies.

“Consumer satisfaction is very important to insurance companies,” says Peter Foley, vice president for claims administration at the American Insurance Association, an industry trade group. “It’s very good if you can keep the current customers happy.”

A recent J.D. Power and Associates study found that claims satisfaction for car damage declined in the first quarter of 2012 but headed back up in the spring. One major — and most improved — factor in car insurance claims identified by J.D. Power: The amount that customers paid above the deductible dropped dramatically. The study found those amounts decreased by $36 per claim, to an average of $218, driven by the decrease in the number of customers who paying more than $300 over their deductible. The study did not identify the reason for the dramatic drop, but it is likely connected to rental car costs, which is the most frequent reason why consumers pay above the deductible.

When filing a claim, consumers can bring in misconceptions about the claims process, thanks to advertising or others’ experiences. Before you file your first or next claim, keep in mind these five myths. 

1.    My policy will cover rental car costs.

Renting a car while your own car is in the repair shop can raise out-of-pocket expenses, especially if you decided against rental reimbursement coverage. One out of three people filing their first claim don’t know whether they had rental car coverage, according to J.D. Power’s research. Experts say it’s typically an insurance option that costs $20 to $40 a year; a policy may offer a daily rental rate of $20 to $30 a day for 30 days. 

“In their effort to offer the lowest price, some companies will try to shave that off to win your business,” says Jeremy Bowler, senior director of the global insurance practice at J.D. Power. “That $20 (a year) is a sound investment in my eyes.”

Even if you choose rental reimbursement, the rental car fees still may exceed your daily allowance, adding up as your vehicle sits in the shop. If you need a minivan, sport utility vehicle or luxury car, rental car coverage likely will be inadequate, Bowler says.

“Customers may not remember that they made a decision (against rental reimbursement),” says Randy Hanson, auto director at Allstate. “Now, they’re anticipating that it should be covered, so that creates some friction.”

2.    I have to get my car repaired by an auto shop in my insurer’s “network.”

Insurers are prohibited from telling you to go to a particular body shop. However, many insurers have created networks of repair shops, which can be beneficial if you don’t know a reputable shop in your area.

Insurers typically benefit because they’ve cut deals on parts and labor rates in exchange for sending business their way, says Mark Romano, director of insurance claims projects at the nonprofit Consumer Federation of America. But consumers should remember that they don’t have to use these shops, he says.

However, using an insurer-recommended body shop does have its advantages.

Working with a body shop recommended by your insurer may “fast track” your claim, Bowler says, getting you back in the car sooner (unless if it’s a high-demand period for repairs, such as after a major storm).

Also, the insurer will accept the shop’s documentation of repairs and estimate without requiring examination by a claims adjuster, speeding up the claims process. Foley says shops recommended by the insurers typically result in higher-quality repairs.

3.    My insurer will cover the full amount I owe on the vehicle.

If it’s going to cost more to repair the vehicle than for the insurer to buy the car off you, an insurer will total it. If you’re “upside down” on the loan, which could happen if you chose four-, five- or six-year financing, the settlement amount could be disappointing.

Insurers use factors such as Kelley Blue Book values and comparable vehicle sales in your area to determine the replacement value.

Computerized systems that don’t adequately consider the individual circumstances of each claim can result in an unfairly low settlement for consumers, Romano says. Hanson says Allstate’s claims guarantee policy returns the premium if consumers are dissatisfied with the settlement amount.

Ask the insurance adjuster what information is being used to determine the value of your vehicle. Make sure that you and the adjuster are comparing your car with an equivalent vehicle — not only the same make and model but the same trim levels, same age of tires and so forth. If negotiations take place, be armed with information that could help raise the settlement, such as if you recently added top-of-the-line tires.

4.    My car will be fixed with new manufacturer parts.

To keep costs down, insurers will look to repairing the car with used parts or parts made by other companies. If you insist on having new, original parts, the insurer may not pay for those, Bowler says. 

Phrases such as “aftermarket” and “like kind and quality” typically signify the replacement parts are cheaper.

All aspects of the repair process are aimed at getting the car back to pre-accident condition, Hanson says, and it’s possible that recycled parts could be used. It’s up to the consumer to make the choice of new parts vs. used or aftermarket parts.

5.    I won’t have out-of-pocket costs for repairs

The deductible often needs to be paid, unless you have plans such as The Hartford’s “disappearing deductible” or Nationwide’s “vanishing deductible.” Situations can arise when repairs wind up costing more than originally thought.

“You can have some instances where there may be other damages that are not related to the accident. When a customer has it in for repair, they might want to have that work done as well,” Hanson says. “It’s an expense they would incur.”

Foley recommends that consumers make sure the repair shop doesn’t fix dings, fender damage or other items unrelated to the accident. If so, it can increase your out-of-pocket expenses.

If you think the damage is legitimate and your car insurer disagrees, be prepared to fight. “You have to be on your guard and deal with these people just like you would if you were trying to negotiate the best price on a car,” Romano says.


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