The Iowa Collision Repair Association notched up a legislative victory this session using the passage and enactment of the bill raising the harm threshold for a salvage title.
“We wrote that bill,” ICRA lobbyist Scott Weiser said Tuesday of Senate File 230, which Republican Gov. Kim Reynolds into law on Friday.
“We'd what's promising as of last week,” said Weiser, president of Capitol Strategies Group.
The House and Senate passed SF 230 in February.
Iowa law had defined a “wrecked or salvage vehicle” as one “that the cost of repair exceeds fifty percent from the fair market price from the vehicle.” SF 230 raises that threshold to vehicles needing repairs in excess of 70 percent of fair market value.
Salvage = total loss
Salvage titles go hand-in-hand with the promise of vehicles as total losses, a standing which carries ramifications for the collision repair and auto insurance industries. The Iowa Insurance Institute and American Property Casualty Insurance Association supported the bill alongside the ICRA, and Weiser said that while body shops and insurers aren’t always capable of working together, “we did with that one.”
Asked if Iowa shops were taking a loss due to vehicles being totaled, Weiser said, “I think that became a problem.”
Technically, an equivalency between the salvage value and total loss threshold isn’t explicitly codified in Iowa law or regulations, based on Tyler Ernst, an associate at Des Moines, Iowa-based LaMarca Law Group who in 2021 wrote about Iowa’s old 50 % threshold.
“Iowa law is silent regarding a threshold where a carrier must think about a vehicle a total loss,” Iowa Insurance Division communications director Chance McElhaney agreed within an email Tuesday. “It's as much as each carrier to determine when they'll think about a vehicle to be a total loss.”
“The Iowa DOT needs a Damage Disclosure on certain vehicles when damages hit, or exceed, 70% from the value. DOT will ‘brand’ the title accordingly.”
However, Ernst said an effective legal argument holds that because the vehicle’s damage automatically forced it to carry a salvage title, it’s impossible for that insurer and also the repairer to revive it to the prior state of existence: a vehicle having a normal title. Thus, the carrier must cover losing by totaling the vehicle and make payment on consumer its cash value.
Ergo, the Iowa salvage threshold equals the entire loss threshold anyway.
Arguments to lawmakers
Bill advocate Sen. Tim Kraayenbrink, R-Webster, cited consumers underwater on loans like a reason for SF 230’s changes.
The amount an insurer taken care of an overall total was unrelated to the vehicle loan, he told the Senate on Feb. 3, prior to the bill passing that body 45-1.
“An individual must pay from the loan before they get another one ,” Kraayenbrink told the Senate.
Sometimes, the total amount from the loan for any wrecked vehicle would be rolled in to the loan for any replacement, “which automatically starts you with an underwater loan balance inside your new vehicle.”
Weiser said banks didn’t wish to total vehicles either.
Kraayenbrink also cited the disparity in salvage thresholds between Iowa and a minimum of one neighboring state. In Illinois, which shares the Quad Cities area with Iowa, “there is a higher threshold for his or her wrecked vehicle amount,” he said.
A vehicle with 50-70 percent worth of damage would have commanded an Iowa salvage title. But based on Kraayenbrink, it may be purchased in Illinois with a fair title under that state’s 70 percent threshold — after which titled in Iowa as non-salvage.
“It’s not really fair with a in our purchasers over here,” he said.
State Rep. Jacob Bossman, R-Woodbury, described the bill as necessary given technology driving up repair bills.
“This is a modernization issue,” Bossman told the home Feb. 16. SF 230 acknowledged changing vehicle technology and an “outdated” 50 percent threshold, he said.
A salvage title was meant to “alert a purchaser for possible major issues affecting the integrity of a vehicle,” Woodbury said. But because of technology like computers and sensors, “the brink is now easily exceeded,” particularly on older vehicles, he explained. This occurred even when critical components such as the frame or powertrain weren’t affected, he said.
Weiser said repairers could demonstrate how such charges racked up on the vehicle. “I believe they did a fantastic job,” he explained.
Weiser said another tactic involved giving lawmakers an excursion of his late-model Cadillac and showing off we've got the technology which may elevate repair bills. Quickly, it “appears like money,” he explained.
Bossman also called Iowa “an extreme outlier” at 50 % and noted that 70 % still fell below the American Association of Automobile Administrators’ recommendation of 75 %.
Weiser said ICRA had “a roadmap that looked really ugly” to exhibit legislators Iowa’s outlier status in a sea of states with higher thresholds. “That number had just gotten way outdated,” he explained.
“This is also, and more importantly, someone protection issue,” Woodbury told his fellow representatives. An “unnecessary salvage title” cuts a vehicle’s value and can produce underwater loan situations, he explained.
“This can be a prudent adjustment that I hope that this body will support,” He explained.
But some representatives expressed concern for vehicle buyers.
State Rep. Brian Meyer, D-Polk, allowed that Iowa represented an outlier “to some degree,” but said other states also offer other protections related to damage above 50 % of cash value.
He proposed what he called “a consumer protection amendment” for vehicles with damage between 50 % of money value — “which now would be totaled” — and 70 percent.
Such vehicles wouldn’t get a salvage title, but his amendment might have require disclosure that the vehicle had sustained significant damage.
“That is a severely damaged vehicle,” Meyer said.
He argued that the buyer deserved consumer protection, for the seller already knew the vehicle’s history. “That’s why we have this law,” he explained of the 50 percent salvage threshold.
“What’s the harm in adding that consumer protection part?” Meyer said of his 50-70 percent declaration. It was “simply warning the buyer,” he explained.
However, Bossman questioned if Meyer’s amendment was germane, and House Speaker Pro Tempore John Willis, R-Spring Lake, agreed it wasn’t. Meyer required a vote to suspend the guidelines, however it failed 38-54.
Rep. Dennis Cohoon, D-Des Moines, called this decision precluding a vote around the amendment “very unfortunate” and said lawmakers from both parties had historically supported someone protection amendment. Without Meyer’s proposed change, SF 230 wasn’t someone protection bill “as much as it could happen to be,” Cohoon said. He said he'd oppose the balance.
Democratic Iowa Attorney General Tom Miller also opposed the balance, citing consumer protection, according to Weiser. “We argued it was consumer-friendly,” Weiser said.
The bill passed the home 65-27.
Total loss statistics
CCC’s 2021 “Crash Course” indicated that 20.Five percent of nationwide vehicle appraisals in the system were flagged as total losses in 2021, up from 19.2 percent in 2021. Although the increase might in part be due to larger vehicles driving faster and crashing harder on less congested pandemic-era streets, vehicle technology might indeed play a role.
Overall, the proportion of totaled losses has risen from what had been just 15 percent of vehicles totaled a decade prior. In 2021, the entire loss percentage dropped as low as 14 percent.
The average totaled vehicle in 2021 cost $10,444, which would mean a repair order above $5,222 would’ve sent it to the salvage yard in Iowa. The 70 % benchmark underneath the new law allows repair orders as high as $7,310.80 prior to the vehicle will be a total.
The average repairable vehicle in 2021 was written for $3,421 worth of damage and had a cash value quantity of $16,657. A repair order worth 50 percent of vehicle cash value would be $8,328.50; a 70 percent threshold would mean any repairs estimated at $11,659.90 or higher would represent a total.
“Higher total loss frequency occurred at a time when total loss vehicle values were also rising, driving up total loss costs for that insurance segment substantially,” CCC wrote of the season 2021. “Total loss frequency continues to be increasing during the last many years because the U.S. experienced more severe weather, the average vehicle age in the U.S. remained over 11 years, and scrappage rates hit record lows. Higher repair costs were additionally a factor, especially among younger vehicles that normally have lower total loss frequency.”
