State Farm: Don't Get Any Ideas

Bertel Schmitt
by Bertel Schmitt

If news about recalls can’t bring Toyota sales in China to their knees, maybe insurance premiums will.

The Nikkei [sub] reports from China that insurance premiums on Toyotas have recently risen by as much as 40 percent. Insurance premiums are going up everywhere in China. No wonder, considering that more than 100,000 die a year on China’s roads, and about half a million are wounded. But Toyota premiums are rising particularly sharply.

Now, read what those premiums are, and cry. The annual premium on a standard 90,000 yuan ($13177) damage policy for a Toyota has risen to 2,000 yuan ($292). Per year.

In related news, Chinese drivers must have followed the Senate hearings closely. Peoples’ Daily reports that Chinese owners of recalled RAV4 feel discriminated. “In the US, the company provides door-to-door service to consumers involved in the recall,” tells the paper to the astonished masses. When drivers bring in recalled vehicles themselves, “the company offers transportation reimbursements and a loaner car of the same model.” No such luck in China. “On some online forums, many RAV4 owners are discussing the possibility of filing a class action suit in China against Toyota,” says Peoples’ Daily. Again, they must have picked-up that term from the press. There is no such thing as a class action suit in China. According to the New York Times, “the ruling Communist Party discourages the filing of lawsuits with multiple plaintiffs, saying that such lawsuits could disrupt social stability.”

The classical class action suit remains a predominantly American phenomenon. Some countries allow groups (comprised of individuals, or certain organizations) to bring suit. Most countries don’t allow class action or mass action suits.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • L'avventura L'avventura on Mar 04, 2010

    Insurance is a competitive market, consumers will move to cheaper alternatives. Statistically speaking any of the recall related issues would not correlate with an increased amount of claims. If State Farm is alone with this, then its poor business making or they have an ulterior motive. I've been to China numerous times, the variables that contribute to accident/injury/death on Chinese roads are abundant and have more to do with the driving environment then anything else. Also, I've recently become to wonder why automotive companies don't run their own optional car insurance for their own cars. For instance, Toyota could offer insurance for their own cars, it would be serviced through their dealers that could be offered at a lower price then places like State Farm. The dealers would still need to be paid, but parts could be close to at cost, they could completely avoid advertising costs, and dealers will be happy for the extra revenue. The cost of covering injury or damage to other cars won't be any less expensive, but it would also be an incentive for the company to make safer cars, since the car maker would be financially responsible for any injury within their cars.

    • See 2 previous
    • Bertel Schmitt Bertel Schmitt on Mar 04, 2010

      Volkswagen is still doing it and making tons of money with it

  • Robert.Walter Robert.Walter on Mar 04, 2010

    The issue is not whether premiums (aka rates or prices) in China are a fraction of those in the US, but rather how they compare within that market. As said above it is a competitive market segment, and has to be considered from that viewpoint. If premiums on Toyotas are rising across the board, then this more reflects an issue with the brand, and less with any one, or few, insurers. One of (IIRC) Psar's previous arguments for Toyota was Total Cost of Ownership ... assuming that after price increases hit, that the rates (aka prices) for non-Toyota vehicles don't rise equally, and that the pre-increase Toyota rates were less, or equal with those on non-TMC products, then the only question is whether TMC is still competitive after the rate increases. If the cost to insure a TMC product became more expensive than that of non-TMC product, then TMC will have lost a competitive advantage and this Will cause some customers to buy non-Toyota product (and TMC to have to incentivise those potential customers to keep them from defecting.) If the relative cost to insure is still better than the competition, then TMC will be OK.

    • See 2 previous
    • Psarhjinian Psarhjinian on Mar 04, 2010
      Toyota owners aren’t captive. Cars can be traded or sold... Go and try to trade in your car for an equivalent model, same age/wear or newer. You are not going to come out ahead in financial terms. The depreciation alone will be a crushing hit; taxes and seller's margins only add to the pain. In the end, you're several thousand dollars in the hole. Most people cannot afford to take such a hit. Most people are not wealthy, many more than was previously the case. ...insurance companies can be changed... Insurance companies often move in lockstep. They all have similar rate tables, and it's only a matter of risk/benefit that determines how much "pain" they want to endure and most don't want to endure much at all these days. An average driver might save a few hundred dollars a year. Maybe. They'll also lose loyalty discounts and risk cancellation penalties, and their new insurer may opt for the same coverage increase.
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  • Tassos Jong-iL Communist America Rises!
  • Merc190 A CB7 Accord with the 5 cylinder
  • MRF 95 T-Bird Daihatsu Copen- A fun Kei sized roadster. Equipped with a 660cc three, a five speed manual and a retractable roof it’s all you need. Subaru Levorg wagon-because not everyone needs a lifted Outback.
  • Merc190 I test drive one of these back in the day with an automatic, just to drive an Alfa, with a Busso no less. Didn't care for the dash design, would be a fun adventure to find some scrapped Lancia Themas or Saab 900's and do some swapping to make car even sweeter. But definitely lose the ground effects.
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