YOUR CAR’S COLLISION INSURANCE - DO YOU KNOW YOUR RIGHTS?

If you don’t read one other sentence of this article, please read this one: YOU HAVE THE RIGHT TO HAVE YOUR DAMAGED CAR REPAIRED BY THE BODY SHOP OF YOUR CHOICE.

You’ve probably read, seen, and heard a lot about insurance companies over the past 3 years. They ranked right up their with our nation’s big banks in dragging our country into the biggest recession since the Great Depression. AIG who was bailed out by our tax dollars is the largest insurance company in the world and were considered “too big to fail”.

Insurance is a great business if you happen to own an insurance company. Just ask Warren Buffet, the richest man in America and one of the richest in the world. You might think of Buffet as owning lots of different kinds of companies besides insurance and he does. But he will be the first to tell you that he got (and gets) most of the money to buy all of these other companies like Coca Cola, Wells Fargo, NetJets, American Express, Proctor and Gamble, etc. from tax deferred dollars that he raked in from his insurance companies like General Re, GEICO, Travelers, and United States Liability Group.

I laughed at a joke that David Letterman made about Oprah Winfrey….he said “Oprah got ALL the money!” and she is the richest self-made woman in America. Not as funny, but a truer statement, would be “the insurance companies got all the money!” Here’s why. One of the biggest reasons is that they don’t have to pay income tax like you and me or most all other companies in America. Now, to be fair, they do eventually pay income tax, but not until they’ve had a chance to double their money on our insurance premiums by investing them. How did they get this unfair advantage over you and me? Can you say LOBBYISTS? Our nation’s insurance companies own our politicians. When AIG says “jump”, most of our Congressmen say how high? Those few that don’t play ball don’t get reelected because their opponent is getting huge political contributions from the insurance companies.

Think about this for a minute. Did you know that when you mail your premium check to State Farm, All State, or GEICO that they don’t pay a nickel in taxes until years afterward? But you paid income tax on the money that you earned to pay the premium in the same year you earned it. These insurance companies can invest your premium dollars which are tax free to them and earn interest, dividends, and capital gains which are also not taxable for years. That’s simply not fair but “that’s the way it is” as Walter Cronkite used to say. I used to love watching Walter’s documentary, “The 20th Century” sponsored by the “Prudential Insurance Company”.

You would think that our auto insurance companies would have enough money without taking advantage of their insureds, wouldn’t you? Well if this is true why do they:

(1) Drastically underpay body shops that repair their insureds’ cars? In South Florida the average labor rate charged by dealerships’ service departments which does mechanical repair on your car is about $100 per hour. Dealer body shops are paid less than half of that. Now you might not be concerned that a car dealer’s body shop is being underpaid, but you should be concerned that the body repair technician that works on your car is being underpaid. The skill and training level of a body repair tech is at least equal to that of a mechanical repair tech. Why should the body repair tech be paid half as much? Because insurance companies control the payment of 95%+ of all collision repairs, they dictate which body shop gets to repair your car. If the body shop says they can’t do a safe quality repair for the price offered by the insurance company, the insurance company gives the repair to the body shop that will “play ball”.
(2) Often insist on the use of used and non-factory parts. Insurance companies don’t like to call the parts that are bought from junk yards to repair your car “used”. They prefer the euphemism, “recycled”, just like car dealers prefer to call used cars “pre-owned”. In many cases, the car’s manufacturer recommends or requires that new factory built parts be used to repair their cars. This doesn’t prevent many insurance companies from insisting that cheap used or Chinese made parts be substituted for new parts made by the car’s manufacturer. The insurance companies keep precise records on the body shops that they will recommend as to the percent of used or non factory parts they use. If one of their approved shops falls short of their average, they drop them and do not recommend any of their insureds to that body shop.
(3) Mislead their insureds into not filing a claim by underestimating the total damage. In 90%+ of collision repairs there is hidden damage. This unseen damage is only revealed when your car is disassembled after the repair process has begun. Often this hidden damage represents thousand of dollars in repairs. Many people carry large deductibles today to soften the cost of higher insurance premiums. If you have a $1,000 deductible and the insurance company’s estimate repair is around $1,000 you might think it’s not worth it to file a claim. We all know that filing a claim will cause your premiums to go up when you renew your insurance. Some people decide to pay for the repair out of their own pocket. If the car is drivable, many decide not to have the repair done at all.

OK, you’ve been warned, but if you’re a Florida resident you’re very lucky. You can choose the body shop that does your collision repair. Your insurance company will pressure you by telling you that they can’t guarantee the work if it’s not performed by their cut-rate body shop. If this is of concern, simply ask the body shop you choose to match the insurance company’s guarantee. Most do anyway. I also highly recommend that you choose a body shop operated by a dealer for the make of car you drive. They have better trained technicians and they have direct access to new factory parts. Also, be sure to check out the body shop with the BBB and the County Office of Consumer Affairs. If your insurance company gives you a hard time, just call 800 342-2762, the Florida Office of Insurance Regulation toll free line for consumer complaints. They will “explain the law” to your insurance company.