Neb. bills would set 75% threshold for totals, increase minimum auto property damage coverage

A bill supported by the Nebraska Auto Body Association would forbid insurers from totaling out an automobile for any repair bill lower than 75 % of actual cash value.

Nebraska Legislative Bill 602 would used likely set the bar even higher, for it exempts certain items from factoring into the repair cost.

“The following shall 't be included for purposes of determining the cost to repair the motor vehicle: Air bags, air bag components, wheels, tires, accessories or modifications added to the motor vehicle after such motor vehicle was manufactured, towing expenses, diagnostic scans, or tax on the consumer care of the motor vehicle,” LB602 states.

Nebraska Auto Body Association Vice President James Rodis explained the rationale for this kind of exemption in an interview Thursday. He explained a scenario arose a few years ago where a truck going four-wheeling hit a bump and blew the airbags. The “car’s totaled,” even though its condition was fine otherwise.

The idea would be for repairers to repair more vehicles which are “perfectly safe to repair,” Rodis said.

Nebraska defines a salvage vehicle as “A late model vehicle that has been wrecked, damaged, or destroyed to the extent that the estimated total cost of repair to rebuild or reconstruct the vehicle to the condition immediately prior to being wrecked, damaged, or destroyed and to restore the automobile to some condition for legal operation, meets or exceeds seventy-five percent from the retail value of the vehicle at that time it had been wrecked, damaged, or destroyed.” Someone can also voluntarily obtain a salvage title for any vehicle.

Rodis also offered the thought of a vehicle totaled at 50-55 percent of their value. The insurer “did OK” in terms of the resellable asset they’ve acquired, while the consumer is upside-down around the loan, he explained.

Edmunds’ newest data found the typical American borrowed $35,373 and paid $4,734 down for a new vehicle in the fourth quarter of 2021 — meaning the average vehicle cost $40,107. Their average loan term was 69.9 months , Edmunds said.

The average used vehicle buyer borrowed $24,496 and set $3,283 down and had a typical loan term of 68.1 months , based on Edmunds.

“An average 2021 model-year vehicle will only retain about 37% of their original value after a five-year ownership period, meaning that a $35,000 new car today are only worth somewhere close to $12,950 after 5 years,” Kelley Blue Book wrote Jan. 21, 2021. Granted, COVID-19 has demonstrated an ability to improve used vehicle valuations since KBB wrote that a last year. Nevertheless, Rodis’ point about being upside-down continues to be a valid one.

CCC’s most recent “Crash Course” data indicates the average repairable vehicle in 2021 only agreed to be 5.94 years old, carried an actual value of $16,488 and was estimated to cost $3,225 to fix. The average vehicle totaled by insurers had reached 9.6 years of life and was worth $9,861.

“People who just bought a new car don't want aftermarket parts installed plus they often would rather repair and their cars instead of have them totaled out by their insurance companies,” LB602 sponsor Sen. Rich Pahls, R-Omaha, told a Feb. 16 Banking, Commerce and Insurance Committee hearing, based on the state legislative news service Unicameral Update. LB602 also would prohibit aftermarket parts during the first 3 years of vehicle life.

The committee has not yet taken any pursuit around the bill.

Minimum property damage liability amount

These statistics on vehicle and repair costs are relevant too for Legislative Bill 612, that also received a Feb. 16 hearing prior to the Banking Committee.

Sponsored by state Sen. Steve Lathrop, D-Omaha, LB612 would bump the property damage minimum limit from $25,000 to $50,000. It might also double the bodily injury or death limit for one victim to $50,000 and double the amount limit for two or more claimants to $100,000.

“The average claim is going to be a lot more than $25,000 and you, the insured, are exposed to what we should call an excess liability claim,” Lathrop said, according to Unicameral Update. “It's bad for the person who gets hurt too, so why do we training?”

The current limits go as far back to a minimum of 2005. $25,000 in January 2005 dollars is worth a lot more than $34,292 today. It’s also nowhere near Edmunds’ average $40,107 new vehicle. Actually, it doesn’t even replace the average $27,779 second hand vehicle.

On another hand, Nebraska Insurance Federation and Nebraska Insurance Information Service representative Coleen Nielsen argued Feb. 16 that the further premiums to pay for these higher limits could be too expensive for many Nebraskans, based on Unicameral Update. This could produce more uninsured drivers, she said.

“Proponents reason that the bounds weren't raised for a long time and medical costs have risen dramatically, but overall claim value hasn't risen at the same pace because cars are safer, generating serious injuries less frequent,” Nielsen said, according to Unicameral Update.

Some proportion of repairs are also going to cost more than $25,000, or even the cumulative repair bills would when the at-fault party damaged more than one vehicle.

If the at-fault parties lack enough coverage in those situations, third-party claimants might not have the cash to pay for shops the total amount. Sure, the sufferers could sue the at-fault parties for that difference, but collecting might take time — and assumes the at-fault driver even has those funds available.

It’s challenging a handle on what number of repairs would exceed $25,000. CCC finds 2.9 percent of direct repair program repairs — which remember, are contractually obligated to save insurers money — cost $10,000.01 or more in 2021. The data provider has additionally encountered instances where a mere calibration alone cost thousands of dollars between 2021 and 2021.

There’s also the potential that a proportion of body shops aren’t conscious of necessary repair procedures. What this means is average severity and a proper repair could actually cost a lot more than consumers and insurers anticipate.

One inkling of this can be found in the famous 2021 “OMG Camry” estimate by P&C Consultants’ Larry Montanez and also the late James Moy. It demonstrates how a hypothetical 2010 Toyota Camry quarter panel replacement could command 321 lines on the sheet and price more than $12,400 if your shop followed proper procedures and finest practices. That estimate even used a below-average $44 per hour rate for those labor and a $45 paint materials rate. .

As of Friday, the Banking Committee hadn’t voted on LB612 either.