Never accept a cash settlement in lieu

As the motoring public becomes more aware of their rights concerning crashworthy collision repairs, IVIC is noticing an increase with some insurance companies offering to cash settle collision repair claims rather than repair the collision damaged vehicle for the owner.

This is a very cunning ploy by insurers as it legally absolves them from many statutory responsibilities and other expensive costs. Cash settlements also allow insurer’s to maintain a very low collision repair average which helps them to maximise profits for their shareholders.

This is how it works: A customer purchases a motor vehicle insurance policy. Pursuant to the insurance policy contract the insurer accepts responsibility to repair the collision damaged vehicle to a safe crashworthy integrity when the vehicle sustains collision damage.

In addition to the above the insurer is also responsible for all other indirect costs that apply which include upholding their legal Duty of Care responsibilities and providing a collision repair warranty for each collision repair for the lifetime of the repaired vehicle. 

Some insurers offer a fully transferable lifetime collision repair warrantee which allows for all future owners of collision repaired vehicles to also claim against the original policy. 

As mentioned in the 'The Truth about the Smash Repair Industry & Smash Repair Budgets and Stakeholders 'links of this web site, smash repairers do not receive an adequate budget from insurance companies to repair collision damaged vehicles to safe crashworthy integrity. Yet to their financial detriment, smash repairers operating under the insurance controlled regime are prepared to accept whatever work that is offered to them from insurers.

Insurance companies and their assessors are notorious for reducing the initial repair quote leaving very little (if any) profit for smash repairers in such jobs. However smash repairers knowing they cannot provide safe integrity repairs for the reduced amount, foolishly are prepared to cut corners and sacrifice on quality and safety during the repair process and accept these quantum reduced inadequate jobs. Unfortunately the vehicle is later returned to its owner with defective repairs and with disguised unrepaired damage.

There is certainly no rational explanation why smash repairers accept these jobs; perhaps it is to sustain a false cash flow requirement, whatever the reasons, their actions are definitely negligent and clearly breach their Duty of Care responsibilities.

This method of quoting and allocating repair work is beginning to backfire on insurers as the owners of collision repaired motor vehicles are beginning to realise that their collision repaired motor vehicle has not being repaired to a safe crashworthy integrity. 

The IVIC 'Structural Tolerance Report' provides owners with the required forensic technical evidence to help support their complaints of unsafe and defective repairs. It also allows owners to successfully claim additional yet more expensive remedial reworks against their insurer and usually free of any cost to the vehicle owner.

Let's put this into perspective. - A smash repairer might quote collision damage for say $5,000. This is the amount required to repair the collision damage to what is known as safe crashworthy integrity. However before the repairer can commence repairs he first needs to obtain an authority to commence works from the insurance company. 

An assessor employed by the insurance company (or an assessor contracted by the insurer) has a responsibility to control and mitigate costs for their employer or contract provider. The assessor will subsequently assess and quantify the collision damage against the original quote as supplied by the smash repairer and interestingly, in almost every situation the quantum amount will be reduced from the repairer's original quote.

The assessor justifies the reduction by slashing either the quantity of hours (the labour content) required or repairing, rather than replacing damaged components or substituting genuine replacement parts in lieu of cheaper and more inferior aftermarket replacement parts, or a combination of both.

The assessor then values the damage at say $2,200 (a reduction of $3,800 from the original quote) and approves only that amount ($2,200) for the repairs. Wanting to keep the workshop full of work and keep in favour with the insurance company, smash repairers foolishly almost always accept the cheaper quote.

This method of quoting and repairing motor vehicle collision damage is obscenely negligent. It will not be long before we see all stakeholders joined as co-respondents in potentially huge industrial contributing negligence actions. 

In the meantime however vehicle owners can access the IVIC 'Structural Tolerance Report' product to obtain the technical evidence required to support their claims that their collision damaged vehicle was not repaired to a crashworthy compliant integrity and pressure their insurer to rectify accordingly.

Apart from the actual cost to repair the vehicle, there are also further and continuing indirect costs which the insurer is responsible, they being:
  1. Repair supplements - items not accepted in the initial quote but later required
  2. Re-works (remedial repairs resulting from customer complaints),
  3. Duty of Care responsibilities
  4. A lifetime repair warranty and /or Guarantee
  5. The cost of administering the above.
  6. The cost of defending legal action brought about by disgruntled customers
  7. For insurers these indirect ongoing costs and continuing legal responsibilities are very high and is clear to see why they favour cash settlements over repairing collision damaged vehicles.

Another very important consideration why insurers favour cash settlements is they can remove themselves from any legal liability from potential negligence suits which might be instigated in the future. To ensure there will never be any confusion as to who is or isn't responsible for future problems with the subject vehicle, the insurer will always insist for the insured to waiver their rights to sue the insurer in cash settlement cases.

However on the other hand, the insured will always be left in a financially desperate position if they accept cash settlements.

The insured will find:
  • They are left with a collision damaged vehicle where the quantum amount from the cash settlement will be grossly inadequate to cover the cost of collision repairs,
  • The insured will have difficulty locating a smash repairer who would be prepared to repair the collision damage for the cash settled amount.
  • The customer will have no avenue for legal redress if something were to go wrong and invariably something is very likely to go wrong under these circumstances.
  • Once the cash settlement has been paid, the insurance policy will be immediately cancelled and recorded accordingly within the insurance industry records. This means the insured is forever duty bound to disclose that they have had an insurance policy cancelled by an insurer whenever they wish to purchase any new insurance policy in the future. This is a clever trick by insurers and a means for them to classify you being a higher insurance risk and charge more for the annual premium and excess.
  • If you do not disclose that you have had an insurance policy cancelled to any new insurer, you run the risk of having any potential claim refused and possibly find yourself being classified uninsurable.