Written by Spencer Pascal
Most motorists involved in a collision usually turn to their insurer and lodge a claim following a crash, allowing their insurer to arrange and oversee the repairs of their damaged vehicle. However, many unwitting motorists are regularly lured away from lodging a claim with their insurer and instead towards a network of accident management companies and their associated repairers.
You may ask, why does someone do this when insurance is taken out for precisely a time such as this? In some instances, vulnerable motorists are deceived by Google spoof adverts into calling a number of who they think is their insurer but is in fact a claim farming company. Alarmingly, this has become more prevalent. In other instances, motorists are lured by repairers or their referrers, such as towing operators, under the pretence that they don’t have to pay anything. This has an undeniable attraction, but someone always pays. The repairs may be performed on credit for the not-at-fault motorist but is sought to be recouped from the at-fault motorist, or more commonly, their insurer. Quite often the repair costs claimed are not only excessive, but in many cases, are also misleading as they exaggerate the repairs performed to the vehicle. Ultimately, it is the insurance paying community who is left to pay these claims through increased premiums.
It is critical that insurers are alive to these claims and the tactics employed by certain repairers who have a track record for this conduct to ensure these claims are appropriately vetted. If done well, effective strategies can be implemented to combat these claims and ensure they are fairly resolved.
How Should Insurers Tackle These Claims?
When a motor vehicle is damaged in a collision, it has suffered what is described in legal terms as a diminution in value. The diminution in value is usually determined by reference to the fair and reasonable cost of repairs to restore the damaged vehicle to its pre-accident condition. An amount cannot be recovered exceeding the cost of repairs and any component of the cost of repairs that is extravagant or unreasonable can also not be recovered.
The task faced by insurers is to determine the reasonable cost of repairs and resolve the claim on that basis. On the face of it, it’s quite a simple objective but achieving that objective can at times prove difficult unless proper measures are implemented for when these demands are received.
Is the Invoice Legitimate?
When presented with an invoice for cost of repairs, claims officers should approach that invoice with a degree of scepticism. It’s important to firstly satisfy yourself that the invoiced repairs were in fact performed. A simple starting point is to request parts invoices as well as images taken during repairs. Most reputable repairers should provide this – alarm bells should start to ring for those repairers that don’t!
Desktop Assessment vs In-Person Assessment
Internal assessing departments within insurers, or external assessing companies such as AAMC or Hello Claims, ably assist settlement departments within insurers to determine whether the repair costs are reasonable or unreasonable by performing line-by-line reviews of each item on an invoice in conjunction with a review of the photographic damage of the vehicle. Usually, the default position for an assessor performing the assessment is to perform a desktop assessment, which in many instances will suffice. An assessor can meaningfully comment on things such as the reasonableness of the hourly rate charged, and the time it should take to complete certain labour operations. Where, however, a suspicion exists that the invoiced cost of repairs is not a true reflection of the repairs performed, a desktop assessment has limitations. On these claims, it is critical for insurers to insist on having their assessor perform an inspection of the damaged vehicle. A physical inspection of a vehicle has benefits that cannot be achieved through a desktop assessment. For instance, an assessor can determine whether all parts have been fitted and whether the labour operations outlined in the invoice have in fact been performed.
What Story does the Data Tell?
In a review of NSW claims from this year involving our firm where a Court appointed expert performed an inspection of a vehicle, the experts, on average, reduced the cost of repairs claimed down to 41% of the initial demanded costs of repairs. This alarmingly high statistic emphasises that exaggerated repair invoices are not a fiction but an unfortunate regular reality.
One of those claims involved a rather innocuous low speed rear-end collision when the following driver momentarily took their foot off their brake whilst stationary at a set of traffic lights causing the vehicle to roll forward and into the vehicle in front. What followed was an alarmingly high repair invoice for nearly $15,000.00 from an accident management company. A Court appointed expert inspected the vehicle, who reduced the cost of repairs down to 20% of the amount sought with the majority of the parts claimed were found not to have been fitted to the vehicle. This is just one example of a reoccurring theme in claims of this nature.
Takeaways
When viewed in isolation, these claims are not overly high, but the regular stream of these claims means they are a large impost on insurers. Unless a rigorous approach is taken to scrutinising each and every one of these demands, insurers will be left to pay inflated repair invoices that do not reflect the reasonable repair costs.
Ligeti Partners not only defends many of these claims but also works closely with many insurers to train claims departments to effectively manage these claims.
Please reach out to Spencer Pascal on 02 8047 2870 or any member of the Ligeti Partners team on 03 9947 4500 if you would like to discuss further.
