Insurers groups are reacting less than enthusiastically to a new Senate bill which would require that whenever a carrier declares a vehicle a total loss, that data is immediately available electronically.
The measure (S3707) was introduced last month at the behest of the National Automobile Dealers Association by Sen. Trent Lott, R-Miss, chairman of the Surface Transportation Subcommittee of the Senate Commerce Committee.
Benjamin McKay, Property Casualty Insurers Association of America senior vice president for government relations, said the measure has defects that prevent it from achieving its “commendable” intent. Marliss Browder, director of federal affairs for the National Association of Mutual Insurance Companies, said the group is still studying the bill, which appears “somewhat problematic.”
The title history of vehicles has been spotlighted in the wake of Hurricane Katrina, which flooded an estimated 5,000 vehicles, and after attorneys general in 49 states required State Farm to put aside $40 million to reimburse car buyers after it rated 30,000 vehicles damaged to the point of total loss, but did not disclose that fact when they were sold.
According to David Regan, NADA vice president of legislative affairs, currently states vary in their title requirements, and some require a total loss to be identified as a salvaged vehicle on resale, while others allow the sale with a clean title.
He noted that while insurers have made a listing of Katrina-damaged cars available, there are 5 million vehicles that are declared a total loss from other causes each year and that data is not made public. His group would like to see it available on sites like CARFAX or Experian's AutoCheck.
If an auto dealer gives a $10,000 credit on a trade-in that turns out later to be a total loss, they are forced to sell it as salvage and lose 40 percent of the car's wholesale value, said Mr. Ragan.
NADA says there is evidence many of the estimated 500,000 Katrina-damaged vehicles are now returning to the marketplace, meaning unsafe cars are on the road and consumers can “overpay for a wreck that should be in the junkyard.”
The proposed bill requires auto insurance companies to make commercially available: the date of total loss; the primary reason (i.e., damaged, flooded, stolen), and the odometer reading.
However, according to Mr. McKay, the measure would not work for vehicles without comprehensive insurance whose owners sell them to a salvage yard after a wreck.
“The intent is commendable. People should know what they are buying,” he said, but Mr. McKay estimated the bill's requirements “would capture only 20 to 50 percent of the vehicles they are trying to identify.”
He also mentioned that motor vehicle records are traditionally the province of states, not federal government, and that the states have differing definitions of how badly damaged a vehicle must be for it to be declared rated salvage.
Mr. McKay also wondered whether the issue represented enough of a problem “that it warrants overriding state laws.”
Ms. Browder said she wondered about a bill with provisions that would mean commercial entities like CARFAX or AutoCheck would “make more money.”
American Insurance Association spokesperson Dennis Kelly would not comment directly on the bill. He said the group supports a permanent national vehicle title branding for all vehicles meeting any state's definition of a total loss.
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