Overpayment frequent when vehicles are deemed total loss, company says

Published on Insurance & Financial Advisor, August 10, 2009, Published by Bob Graham

August 10, 2009 - The majority of cases where a vehicle involved in an insurance claim was written off as a total loss, the insurance company overpaid the claimant, according to an Automall Network analysis of its cases.

Exactly 54% of the 3,200 claims it analyzed had write-offs involving overpayment, said the Fort Lauderdale, Fla.-based vehicle buying service, which works for insurance companies and consumers in vehicle loss cases. Another 38% involved underpayment, leaving just 8% falling within $100 of the fair and reasonable market value.

In the overpayment category, for 10% of claimants, the overpayment was at least $2,000, while another 15% saw overpayment of between $1,000 and $1,999, according to the analysis. About 14% of overpayments were between $500 and $999, and another 8% involved claims where overpayment was between $300 and $499. Just 7% involved payments of between $101 and $299 over the fair market value, the analysis found.

On the underpayment side, 11% of claimants were paid between $500 and $999 of the vehicle’s fair market value, and 9% received between $1,000 and $1,999 less than the value. Just 4% received checks for $2,000 or more less than the value, slightly less than the people who saw between $100 and $299 less (7%) and $300 to $499 less (6%), according to the analysis.

Automall Network’s study also found that most policyholders are quite frustrated by the claims process and have several complaints, the most common being that they owe more than the insurance company is willing to pay them.

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