|Posted on December 11, 2016 at 12:30 AM|
Insurance companies are in business to make money, and consumers are all too happy to help in that process. Simply stated insurance companies want to take more money in than they spend out. A LOT MORE. Yet consumers forget the nature of the beast they are dealing with. In the hail business insurance companies curb their losses by shorting the first or initial estimate. This starts with the initial inspection of your vehicle. Most people assume that this initial inspection of their vehicle is the only inspection needed because they assume what we call "the first look" in the industry, is actually accurate. Out of the hundreds upon hundreds of repairs of vehicles I have consulted on, maybe a dozen of those that were looked at out in the field were sufficient and did not need a final inspection and supplementation. Whether this is intentional on the part of insurance companies or not, I'll leave that up to the reader to decide. But what is not debatable is that when a car is assessed at hundreds if not thousands of dollars short of its actual damage, the insurance company stands to save whatever that amount is if the customer doesn't repair the vehicle. So let's say a vehicle has $5500 actual damage on it, and they insurance company cuts a check to the owner for $3500, they just saved $2000 as long as the customer doesn't fix the vehicle. If they do there is a process called supplementation where the shop doing the repair reviews the original estimate, they look at the actual damage on the vehicle and they request additional or "supplemental" monies to cover the extra work or parts that need repair or replacement. Multiply this scenario times thousands of cars and insurance companies stand to save millions upon millions of dollars by engaging in this shorting process. The trick is to write the initial amount high enough to an insured that isn't familiar with the value of the damage of their vehicle which is most people. If they write the initial estimate too low and it's obviously underwritten, that will prompt the client to seek additional assistance in being compensated for the remainder of the damage. However if the insured gets a substantial amount of the damage, they are more likely to do something with the money other than use it to fix the vehicle, and whether that is the end goal of insurance companies or not, I cannot say. But I can say after observing hundreds upon hundreds of this scenario that this is definitely the outcome. I often see people take $2000 or more less for the loss of value on their vehicle because they believe they've made out like a bandit somehow, when in fact it is the insurance who has come out on top of the deal.
A lot of people also think they if they don't get their vehicles fixed that they will somehow save money on their insurance because their premiums won't go up. You'll see some hail companies say that making a hail claim won't raise one's insurance, and technically if you were the only person in your city who got hail damage that's probably correct. It's not you making a claim that will raise your premiums. It's your neighbors. If you live in an area that got hit by hail and let's say your car was covered and did not get affected, guess what, your premiums will adjust to help disperse the loss in that area. This is simply how insurance works. So when I come across someone who has hail damage on their car, who has the coverage to fix it and they don't because they are thinking they are somehow saving money? Let's look at the math on that. Let's say for example someone has $5000 of hail damage on their car (this is a very common amount). If you take $5000 and divide that by $25 a month (let's say that's what they think they are saving that their premiums won't go up by not making a claim) 5000/25 is 200. That's how many months one would have to pay in additional premiums to equal the loss they just experienced, that's 200 month or 16.67 years of paying an additional $25 in premiums to equal the loss they just experienced. You can play with the numbers to satisfy whatever your expectation of the "change" is that you might experience. The hugest irony here though is that people who think this way are going to not only suffer the $5000 loss in value of their vehicle, their premiums are going to go up anyway due to all the claims made in their area. The only way to avoid this would be to well, MOVE. It doesn't take a large amount of investigation to figure this out. Simply post a query in the Next Door app or anywhere else and ask, and you'll probably get a similar result as below.