Determining Value when a unit is written off

jonny-chicken

jonny-chicken

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Jun 24, 2009
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Hello all... Just wondering if anyone has any experience dealing with insurance companies to determine value when your vehicle is written off.

I am in the middle of a wrestling match of sorts with my insurance company over the value of my tractor that they are writing off due to a collision claim.

Long story short, their valuation sucks!

I've been back and forth with them for the past week about it...

Wondering how others have dealt with this.

Thanks!
 
Rob said:
Ooh good luck. Our insurance company has us put a value on all of the equipment at renewal time and it something happens we valued it and they paid that or atleast they did when we had one stolen
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Thanks for the reply Rob.

Wow, wish my insurance company would go for that...

We also put values on all our equipment at renewal every year... We were told long ago to keep those reported values high, as insurance companies will usually refuse to pay anything more than that stated value, but of course are more than willing to undercut it...

In our case, they don't seem to care what value we assigned at renewal, but they are telling us the amount they are offering is based on 'market value'... ie, what we would get if we tried to sell it before it was wrecked...
 
I haven't been involved in something like that for quite a while, but when I was I noticed that the value they would pay was generally more than market value ... but that was years ago.

About a year ago a friend of mine totalled his car and the insurance company gave a low-ball offer. He went back to them armed and they upped it.
 
JC they are usually pretty good at getting a few prices of comparable trucks on the market, then really you have to have a reason why your trucks are worth more ie: better maintained, interior are immaculate past trucks sold for more than they were worth etc. You can make your case it may or may not help, also depending on the truck you may buy it for salvage. We had 1 written off a few years ago and bought it for $6500, it only had 6500KLMS on it and the tires and rims on the back end were worth 8K, still getting parts off of it. I hate to say it but we all think our equipment is worth more than it really is.
 
theman said:
I haven't been involved in something like that for quite a while, but when I was I noticed that the value they would pay was generally more than market value ... but that was years ago.

About a year ago a friend of mine totalled his car and the insurance company gave a low-ball offer. He went back to them armed and they upped it.
Click to expand...

Yeah, that's the position we are in... They gave us an initial low-ball offer... I freaked out, and they have improved the offer, but not quite to my satisfaction... Still working on them...
 
lowmiler88 said:
JC they are usually pretty good at getting a few prices of comparable trucks on the market, then really you have to have a reason why your trucks are worth more ie: better maintained, interior are immaculate past trucks sold for more than they were worth etc. You can make your case it may or may not help, also depending on the truck you may buy it for salvage. We had 1 written off a few years ago and bought it for $6500, it only had 6500KLMS on it and the tires and rims on the back end were worth 8K, still getting parts off of it. I hate to say it but we all think our equipment is worth more than it really is.
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Yeah, I thought they would be better at finding comparables than they are... They seem pretty lazy to be honest... The adjuster hires an outside appraiser, and they in turn come up with a value by calling 3 dealerships to ask what they would charge for such a vehicle... just weird...

I found some comparables myself, which has spurred them to improve their offer, but the original offer was so low that even their improved offer sucks, IMO...

As for the salvage, I would buy it if worth it... but they provided me with the bids they received on the salvage and offered it to me for the same price... over $20,000 ... and this truck has over 700,000 kms... not worth it for us this time around...
 
@jonny-chicken ... Geez jonny ... who the hell is your insurance company? Valuation at renewal is standard practice.
If your insurance company is under-valuing your unit, just ask them to find you one that is your same spec, for the amount of money they are offering.
Under-valuing is usually a result of a lazy or inexperienced appraiser.

Overall, insurance is going to be a nasty expense this year, market wide. If you're with one of the relative newcomers (Intact is a good example) you're going to pay for the privilege, or so I hear on the "street".
 
Michael Ludwig said:
Overall, insurance is going to be a nasty expense this year, market wide. If you're with one of the relative newcomers (Intact is a good example) you're going to pay for the privilege, or so I hear on the "street".
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I heard the same thing, thank god we are in a captive and have some control over our destiny as opposed to some pencil pusher sitting in an office arbitrarily saying everyone has to go up 30% (a number our broker gave me).
 
Michael Ludwig said:
@jonny-chicken ... Geez jonny ... who the hell is your insurance company? Valuation at renewal is standard practice.
If your insurance company is under-valuing your unit, just ask them to find you one that is your same spec, for the amount of money they are offering.
Under-valuing is usually a result of a lazy or inexperienced appraiser.

Overall, insurance is going to be a nasty expense this year, market wide. If you're with one of the relative newcomers (Intact is a good example) you're going to pay for the privilege, or so I hear on the "street".
Click to expand...

Haahaa... I'm with AIG... We provide values at renewal, but they are slightly inflated so as to not undervalue ourselves...

And yes, I also agree the appraiser was lazy in this case... haahaa... in fact those were my exact words to them!

We ultimately decided to settle at a value that was $7000 higher than their original offer... We felt we could justify and get a little more, but also felt that if we pushed too hard for a few thousand bucks, we may find them pushing even harder when renewal comes...

I too believe insurance rates are going up this year...
 
What ??? ... If your broker came at with a 30% increase, assuming you have a good loss ratio, him (or her as the case may be) would be kicking their lunch pail down the road.
Assuming Armageddon is off the table for the prior year, any broker that comes at you with a 30% increase has not been doing their job. The keys to manageable insurance cost are pretty simple;
First, search out the best broker that you can find and that understands your business. If they promise you the world after a 2 hour meeting, you don't want them. They need to be with you for 30 to 40 hours before you commit. The guy that insures your house, pickup truck, boat, and quad, is not the guy you want insuring your trucks. I guarantee he/she doesn't know sh*t about trucking insurance.
Second, with your broker you examine every insurance payment and claim going back as far as you possibly can. The key is to determine your loss ratio over 3 years, 5 years, 10 years, and 25 years. (This part will sicken you ... from this number you will know what you paid insurance companies, and what they paid you.) Somewhere in this exercise you want to be able to say I have/had a 5% loss ratio. When you can do that, you have leverage. The lower the ratio over the longer term increases leverage.
Third, you, with broker in tow, want to sit down face-to-face with your insurer ... yes, that's right, the actual insurance company ... they folks that write the cheques. You want them to become like family. You want them to know your business as well as you do.
Lastly, you're in this for the long haul. You want to establish a long term relationship with your insurance company ... the longer, the better. You'll even want to consider paying a bit of a premium in the beginning to be able to stay with one company. In crunch time it pays off huge.
If you're one of those companies that bounces around every year, you're just a window shopper, and insurance companies will treat you like one. They won't care if you like what they are offering. They don't care if you change. They do know that you'll be back in about 5 years ... if you're still in business.
 
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Michael Ludwig said:
What ??? ... If your broker came at with a 30% increase, assuming you have a good loss ratio, him (or her as the case may be) would be kicking their lunch pail down the road.
Assuming Armageddon is off the table for the prior year, any broker that comes at you with a 30% increase has not been doing their job. The keys to manageable insurance cost are pretty simple;
First, search out the best broker that you can find and that understands your business. If they promise you the world after a 2 hour meeting, you don't want them. They need to be with you for 30 to 40 hours before you commit. The guy that insures your house, pickup truck, boat, and quad, is not the guy you want insuring your trucks. I guarantee he/she doesn't know sh*t about trucking insurance.
Second, with your broker you examine every insurance payment and claim going back as far as you possibly can. The key is to determine your loss ratio over 3 years, 5 years, 10 years, and 25 years. (This part will sicken you ... from this number you will know what you paid insurance companies, and what they paid you.) Somewhere in this exercise you want to be able to say I have/had a 5% loss ratio. When you can do that, you have leverage. The lower the ratio over the longer term increases leverage.
Third, you, with broker in tow, want to sit down face-to-face with your insurer ... yes, that's right, the actual insurance company ... they folks that write the cheques. You want them to become like family. You want them to know your business as well as you do.
Lastly, you're in this for the long haul. You want to establish a long term relationship with your insurance company ... the longer, the better. You'll even want to consider paying a bit of a premium in the beginning to be able to stay with one company. In crunch time it pays off huge.
If you're one of those companies that bounces around every year, you're just a window shopper, and insurance companies will treat you like one. They won't care if you like what they are offering. They don't care if you change. They do know that you'll be back in about 5 years ... if you're still in business.
Click to expand...

All good advice...

My broker would be promptly kicked out of our office if they uttered anything near a 30% increase... haahaaa...

That said, my premium rates have not changed in several years, and I am expecting them to increase at some point... But even a 5 - 10 % increase would hurt...

We've got a pretty good handle on our loss ratio and I can tell you, insurance companies have made plenty off us... So, I'm not really expecting increases based on claims, but based on the good old fashioned idea of inflation...
 
@Freight Broker ... The short and simple version is it's the percentage of paid premium returned as claims payout. The long version would require me to pen a doctoral thesis on the inner workings of an insurance company, which, although I am quite capable of writing, I have no intention of doing ... that's my edge ... LOL
My loss ratio is about 7% on the 10 years and beyond cycles, and was about 15% in the 3 and 5 year cycles, and for the current year, its about 65%. However, even at that, I am expecting at best a rate decrease, and at worst an "as is" this negotiation.
 
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We went the Captive route because we fight for every penny regarding insurance, whether it's premiums or claims, the last straw was when we had a great year actual claims where under 100k the graciously gave us 30k back and they walked away with 200k. I know it evens out but with a Captive you get a lot more money back when you have a good year and you are not penalized the same as regular insurance year after year if you have a "bad year". I agree with meeting with your insurer I have drinks or golf with our rep from Old Republic once or twice a year, terrible golfer but great guy.
 
Well said Mr Ludwig. It does amaze me when we update carriers insurance in our files at how many change every year as well as flipping brokers. We have been with our carrier for 10 years plus aswell as the broker and have a great relationship. If they would like that to continue as we have an excellent loss ratio their pencil better be sharp.
 
Geez ... everyone take note ... I just got a compliment from Rob ... LOL (Thanks homie )

One more thing to add ... Take your loss ratio and add 35% to 40%, which is what it costs for your insurance company to actually manage your account regardless of losses. The remainder is the insurance company profit.
Suppose your 5 year average loss ratio is 15%. Add 40% for cost, for a total of 55%. Your insurance company has been good and your annual total premium has been $350,000.00 for each of those 5 years.
Assuming my math is correct, total premium paid was $1,750,000.00. Loss and cost (55%) means they paid out $962,500.00. They made a profit of $787,500.00 over 5 years, or $157,500 per year. The brokerage got around 10% of the total premium (already included in the 35% to 40%), which is say 10% for easy figuring, or $175,000.00, or $35,000.00 per year, over the 5 years. The actual broker, the person that sits across the desk from you at negotiation time, gets about half that. Anybody wishing they went to school to be an insurance broker yet ??? ... LOL
Now all this sounds like an awful lot of money not staying in your pocket, HOWEVER, when that catastrophic loss happens, and it will as the odds are simply stacked against you (us as an industry), you'll be thanking your lucky stars you have that professional insurance broker, brokerage, and company in your back pocket.
 
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