16/02/2009

Super-suave ETWB chief exec David Stubbs whisked winsome Insurance Times reporter Lauren MacGillivray off on a fascinating behind the scenes tour of the car valuation business. The day probably went something like this:

The first stop is British Car Auctions (BCA) in Bedford, “a great place for insurers to value total loss vehicles.” Struggling for a familiar point of reference, MacGillivray likens proceedings to “a fashion show for petrol heads,” noting shrewdly, however, that “this isn’t London or Paris.”

As powerful engines purr and growl she watches entranced as “one by one, shiny cars are driven from an outdoor car park and up a small stretch of pavement before entering a covered showroom.” There, she imagines they will be judged on “shape, style and body condition.”

Further enflaming an atmosphere already crackling with erotic charge, Stubbs leans in closer whispering: “A lot of insurers go by Glass’s Guide, but that’s based on what happened in the past and…” he pauses meaningfully, “what might happen in the future.” MacGillivray nods attentively as Stubbs’ masterful hands trace undulating curves in the air to emphasise his point: “It’s trying to smooth out markets rather than reflect them.”

“Insurers consider a vehicle a total loss if repair bills, car rental and paying what it has lost in value add up to more than it would cost to buy a replacement,” she learns, with the payout “ based on what it was worth before the accident.” But nothing is quite what it seems in the parallel universe of motor valuations: “This sounds simple,” she tells her readers, “but can be tricky because of the number of valuation sources such as dealer surveys, value guide books, online pricing sites and private sales. Stubbs, it seems works in subtler ways that this: “He relies on auctions, salvage yards, private sales and any other resource to help determine what a specific vehicle was worth before an accident.”

A self-confessed lover of cars (although clearly not in the sense of that rather disturbing documentary they had on telly recently) Stubbs’ connoisseur’s eye picks out the “high mileage, dents, rust and other imperfections” among the assembled Micras, Corsas and Scanias offered up to bidders including “credit hire, leasing and rental companies, with fleet operators and private buyers.”

He draws her confidentially towards a 1999 Vauxhall Tigra. The rusty driver’s side door, he confides, suggests “the owner regularly scraped it against a curb. The tyre pressure is also low ‚ easy to fix, but could suggest the driver was a bit careless.” Surprisingly, however, the Tigra sells for £1,125 ‚ £125 above the Glass’s price. Perhaps the winning bidder is “a rookie private buyer,” Stubbs snaps, momentarily losing his cool, “or there might be a limited number of Tigras around.” Changing the subject quickly, he suggests adjourning to more comfortable surroundings.

Back at his office in Milton Keynes MacGillivray is starting to wonder where the day is going, but listens patiently as Stubbs tells her that in an audit of “total loss valuations made by five leading insurers, the sums varied from 87% to 105% of Glass’s Guide prices.” ETWB, he avers, “regularly achieves claim settlements of 61% to 78% of Glass’s price,” and “for a book of 16,000 total losses a year, each percentage point off the Glass price typically delivers a £480,000 reduction in indemnity cost.”

Insurers have different views on what constitutes a total loss, he persists. Some insurers consider a vehicle a total loss if repair costs are 51% of re-sale value. Others go as high as 80%. “Car prices are depressed and variable right now,” Stubbs says, and “insurers should be aiming for a trigger point of about 60%.” She’s still nodding, he notices, but somehow without the same rapt enthusiasm as before.

“Sales of new cars are down and there’s an attempt to shift and sell. But the used car market is also depressed because no one can afford to trade up. And it’s tougher to get finance.” Sensing he is losing her, he invites MacGillivray to inspect one of his case files. It’s a Chrysler 300C 6.1 V8 SRT-8, bought new for £40,000 18 months ago. “ It is now worth no more than £15,999,” Stubbs insists, “because it guzzles petrol. Last year, he says, it would have been worth £25,000 to £30,000. There’s no way that conversation’s going to go well,” he says. “But we don’t negotiate; we just try and explain so they understand our reasoning.”

As another conversation seems to be going less well, the speed of Stubbs delivery increases. Insurers can send ETWB their claims details, he gabbles desperately. “The company then researches and decides the vehicle’s pre-accident value and phones the policyholder to discuss their decision and close the settlement. The settled claim details go back to the insurer, which issues the cheque to the policyholder and/or finance company.”

MacGillivray decides it’s time to make her excuses and get out of Milton Keynes – but not before learning enough to understand that “some total loss vehicles still have outstanding loans. An insurer will pay the finance company what it is owed first, and then the policyholder. If the total payout goes to the loan company and the policyholder still owes money, he or she becomes more likely to default.”

Now here’s the controversial bit. “For this reason,’ MacGillivray writes “a senior valuation source [clearly not the one she has just spent the day with] tells Insurance Times, some lower-end car finance companies purposely delay claims settlements. This way, they still get a few payments from the policyholder, and then their payout from the insurer.”

Back at Insurance Times HQ, she stumbles upon another gem to bury deep within this tawdry tale of men and motors. “Research from Gocompare.com released last week,” she writes, “has found that nearly 30% of motorists are delaying repairs to save money. Seventeen per cent say they have put off replacing worn-out tyres and nearly 6% have not fixed brake problems. If these percentages hold true across the country, more than 6 million may have defective brakes or worn-out tyres ‚ which could have a big impact on motor claims.”

That almost sounds like a story.



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