By on February 15, 2013

Drivers who were in a collision often follow the recommendation of their insurance company when it comes to fixing the car. By doing so, they hope for a more accommodating insurance company. They also are likely to end up with a car that has lost a lot of value. In collusion with insurance companies, low-cost collision shops use knock-off or used parts.

“It’s a big problem,” Bob Collins, owner of Wreck Check Assessments told the Boston Globe. “It’s pretty widespread.” Collins says vehicles are often worth an average of about 10 percent less, or more vulnerable to failure, when shops install generic parts.

  • In December, a West Virginia court ordered Liberty Mutual to stop using parts salvaged from junkyards to fix newer cars.
  • California regulators tightened their rules for using knockoff parts last month.
  • Massachusetts repair shops are considering lobbying state regulators to require insurers to pay for new parts for vehicles that are still under warranty, or with less than 36,000 miles: Current regulations require companies to use new, original parts on cars with less than 20,000 miles.

In many states regulations require insurance companies to tell customers what type of parts are being used in repairs. Often, the information is buried in stacks of paperwork.

In Massachusetts, a group representing repair shops, the Alliance of Automotive Service Providers, is considering asking regulators to stop insurers from requiring old or generic parts to fix cars that are still under warranty or that have less than 36,000 miles.

Hat tip to Herr Holzman.
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47 Comments on “Collision Collusion: How Insurance Companies Junk Your Car...”

  • avatar

    I’ve occasionally wondered how the conversation between me and an insurance agent might go if I request that they monetarily compensate me for the lost value in a vehicle that I own which was damaged. Because even if they use brand new parts, the value of the car will still drop. I might be less likely to go that route if the wreck was my fault, but I’d push the issue really hard if I was not at fault.

    • 0 avatar

      It’s perceived lost value. It’s arguably not a real thing since a repair done by a reputable shop will put the car in as good or better than factory condition.

      On vehicles that I’ve repaired and sold, I kept an extensive picture log of the repairs and kept the receipts. Even with a rebuilt title, I was able to get near retail value because I was able to satisfy prospective owners’ uncertainties that come with a rebuilt car.

      Now if we’re talking about compensation, how about when that Mazda with rotted wheel lips gets nailed in the quarter and the insurance company pays for a new quarter panel. Should the owner then compensate the insurance company for the extra value that they added to your vehicle?

      • 0 avatar

        I guess that I assume that because a repaired wreck is automatically worth less to me, that it’s worth less to others as well. Maybe this is not the case.

        My impression is that insurance is supposed to return the vehicle to its pre-wreck condition, not to factory condition. So if your car is rotted out then even knock-off body parts are an upgrade.

      • 0 avatar

        “My impression is that insurance is supposed to return the vehicle to its pre-wreck condition, not to factory condition. So if your car is rotted out then even knock-off body parts are an upgrade.”

        You’re right, that’s their obligation. But no shop is going to install a used quarter panel with rust holes in it just to get the pile back to exact pre-accident condition. It’s give and take, sometimes you end up with more and sometimes less, but it’s done to a standard.

        Yes, people’s perceptions about accident cars are that they’re worth less in general, which is not always true. In some cases, when repaired poorly, they are worth less. In other cases when repaired well, they’re worth more than before. I look at each car individually and make an assessment, anyone prospecting a potential car should employ an expert to do the same so they can make a value assessment of their own.

        That being said, many insurance companies will provide a full replacement value clause for newer cars where accident history does affect the value, which actually does make some compensation for lost value because of the repair where the only comparison is newer high value vehicles.

      • 0 avatar

        The problem is that it takes a skilled eye and knowledge that the average individual does not maintain to determine the exact value of a repaired car. As a car guy I know enough to know that I don’t know enough about body/chassis repair to be able to spot a well done repair job versus a bad repair job that isn’t so bad that it’s blatantly obvious that there’s a problem.

        With that in mind, it’s already an uphill battle for someone to sell me a previously damaged car, if I even give them the opportunity to sell it to me in the first place. Which means that the seller is getting fewer opportunities to sell, increasing the chances that they simply have to take what they can get.

        Clearly not all damaged cars go for reduced values. But I would suggest that repaired or salvage title cars that go for nearly the price of an undamaged version of the same car are the exception rather than the rule.

      • 0 avatar

        @danio: Strawman argument. Insurance MegaCorp will tell the owner his/her Mazda is only worth $750 because of the rust, and the new fender won’t happen. :-)


      • 0 avatar

        @Mykl – Right, it’s a perception vs. reality thing. The perceived value is less because of the unknown, but it’s difficult to quantify exactly how much less in reality unless the vehicle is carefully inspected with a trained eye.

        This is why it’s difficult to pin a number on “loss of value” after an accident and most insurance companies just won’t hear of it on cars more than a few years old.

      • 0 avatar

        The problem is that some things are hard to spot even for a trained eye. There are things you miss because you don’t expect it. We had an S-class that was missing a sub-frame bolt after an accident repair by a body shop. The only way anyone spotted it was because we were repairing a possibly unrelated oil pan leak and had to take the sub-frame out. The bolt hole didn’t even line up.

    • 0 avatar

      I can say that in my particular case I was able to get additional compensation because of the lost value. I was rear ended in a one year old car. The damage cost about five thousand dollars to repair, but after pleading my case to the insurance company, they increased their compensation to about seven thousand dollars due to the lost value and the stigma of having a “wreaked” car.

      Communication is key. They won’t give it to you unless you ask (nicely).

      • 0 avatar

        How true. And it gets harder when the car is older. A classic example is when my then 15 year old Probe GT was damaged in a parking lot. The Geico adjuster, upon seeing the spotless condition of my car, asked if I ever use my car. So he appreciated the obvious meticulous care the car had been given. I groused about having to end up with bondo in the door. He located a replacement door and added the additional money on my breakdown “For Customer Satisfaction”. The fact that he saw my Mark Martin NASCAR decal on the window and we talked NASCAR probably helped too…

    • 0 avatar

      In the event that another party is liable, and he/she has insurance, you can sometimes go after that company for the “diminished” value of your vehicle. I’ve seen it succeed more times than fail. I’m convincing the owner of a Cadillac STS-V (a model of which only 2,500 were made) to do that after her car got rear-ended by some ditzy teenager…

      • 0 avatar

        Don’t get me wrong, everything is negotiable. If someone can convince their insurance company the value of the car has actually diminished because of being repaired, they’ll sometimes do something. With newer cars, this is sometimes recognized with a full replacement value clause.

        With older cars, there are more variables, it’s more difficult to prove. In my experience, more often than not the insurance company will call everything square after the repair.

  • avatar

    Insurance companies want cars to be safer so that they pay out less in passenger related injuries due to accidents, but balk at the prospect of replacing collision related parts with OEM equipment.

    Yes, there is a substantial difference in the quality of a knockoff and the OEM part.

    I don’t work for Ford, or endorse their products, but this video does a great job of illustrating the difference.

    You’ll have to reparse the link, since you can’t post links here for some reason.

    http:// watch?v=Hywvw-hKZGA

  • avatar

    When I worked in a dealer’s parts dept. there were numerous body-shops that would order all new parts to make an insurance claim repair, then send the parts back and put on used parts, but claim the new-parts invoice. These shops always said the same thing to us, “You ordered all the wrong parts!” yeah, right, what a bunch thieving liars.

  • avatar

    The unintended consequences of these regulations is that a car that is in no practical way “totaled”, would be “totaled” because the prices of the dealer-sourced parts to repair it are so high that P+L > 70% of the value of the vehicle after repairs. Some folks would want that, but I would generally want to keep my car rather than get a payoff and try and find an equivalent used one. Lots of luck there, unless you have a silver Camry and drive 15,000 miles annually.

    I went to the Honda dealer for an estimate on a scratched bumper repair, since I thought it would be less than my deductible. $1200!, mostly parts. I ended up having a local body shop do it for $300, mostly because they didnt replace all the parts, but sanded and painted instead. Also, since the VIN was not recorded by the dealer, this extremely minor repair will not show up in a Carfax and unnecessarily reduce resale value.

    • 0 avatar

      You’re absolutely right. A lot of shops will try and lowball repair estimates just to get the work. Make your estimate too high with only the newest and best parts, and it’ll total the car, and it goes to auction.

      Added feautres, like 10 air bags, along with regulation like this is quickly adding to the disposability of modern cars. To counter that, cars are lasting longer on their own merits, so body shops are able to rely less on the insurance gravy train, but if creative can make it up in non-insurance work.

  • avatar

    When I was in the body repair business, there was this thing called LKQ parts. Like Kind Quality.

    I’m sorry, but you’ll just have to understand that the insurance company isn’t going to upgrade your 15 year old rotted POS with all brand new OEM parts, which may or may not be available. The best quality used parts are often reconditioned and installed on older cars, and this is considered acceptable in the industry.

    Now in the case of newer vehicles still under manufacturer warranties, it would absolutely be advised to used OEM new parts. This is what the manufacturers specify for warranty repairs, so body shops should follow their lead. If used parts are installed, this may even affect the warranty coverage on the vehicle.

    • 0 avatar

      Hey danio,

      I think it should depend on the part. I’ve rebuilt a few vehicles myself. Body parts from a lower end supplier tend to be “not guaranteed to fit exactly” or something similar but generally work just fine. I am totally fine with those being used.

      However when it comes to regulated safety devices such as headlights, it has to be OEM. Even the “OEM fit, OEM appearance but half price” products are 99% of the time a 3D scan of the original which are then injection molded. They do not produce the beam pattern the OEM engineer designed, and typically tend to haze and fog much faster. In this case I have pushed for genuine replacement parts.

  • avatar

    “In December, a West Virginia court ordered Liberty Mutual to stop using parts salvaged from junkyards to fix newer cars.”
    Actually salvage parts should be OEM specification parts albeit used which could be neutral if not worn (4 year old fender from a Texas car or bad if worn (4 year old fender from a Wisconsin car). Maybe it should read same or newer year salvage parts only but then how does one prove that when parts are sourced from all over? Maybe salvage parts car vin has to be recorded with the donar parts?

    “California regulators tightened their rules for using knockoff parts last month.”
    Read that as non-oem sourced parts. But this keeps costs down. Maybe the customer gets a choice oem or non oem and a corresponding insurance cost rise/price break and notation to carfax etc.

    “Massachusetts repair shops are considering lobbying state regulators to require insurers to pay for new parts for vehicles that are still under warranty, or with less than 36,000 miles: Current regulations require companies to use new, original parts on cars with less than 20,000 miles.”
    This makes sense in order to keep the manufacturer’s warranty in effect. Surprised that manufacturer’s haven’t weighed in on this.

    The lady in the Boston Globe story with 5 year old MB with replaced door that rattled had a bad repair from the body shop. She should have brought the car back until the shop fixed it.
    I know how this goes as I fought bodyshops for multiple repairs on a punching bag Dodge Neon that my ex-wife owned from new. You have to have a good eye for mis-adjustments and shoddy work (which most people do not have) and be willing to be a pest to the body shop.

    • 0 avatar

      Knockoff parts are knockoffs for a reason. I had to get a knockoff for my folk’s Maxima because a new one was $400 from a dealer a salvage was $250 and I paid around $150 for a unit off ebay. It’s still solid aluminum and equally finished but that’s because it can be drop forged. I wouldn’t trust a chinese part for alternator or other more substantial parts. They are manufactured to a lower standard so while I undersrand the desire to save money there is a fine line between saving and blowing away money.

  • avatar

    It really depends on the part, I’m more then fine with a good condition used OEM fender being used, especially compared to a cheap new Chinese fake. As I generally prefer OEM parts to the aftermarket. Now safety parts like seat belts, airbags and etc, new OEM all the way. Presumably, if the insurers are able to keep their cost down in repairing cars it will translate in to lower insurance premiums for the rest of us.

  • avatar
    Land Ark

    I was a claims adjuster for 2 years. These sort of things really irritate me. Not that I will go around bragging about the company I worked for, it was a crappy place to work, but once you understand what’s going on and how many claims come in, you start to understand why things work the way they do.
    As danio said above, you are only owed what you lost. If a CAPA certified aftermarket part fits and works as it’s supposed to, I don’t really see the problem. 99.99% of potential car buyers who look at your car won’t know that the perfectly alligned bumper cover wasn’t made by the manufacturer of the car. All they will look at is that the car was wrecked (on the CARFAX) and low ball you because of that, not the parts. They aren’t going to pay you more for an OEM parts repair.
    Secondly, if you take insurance companies out of the market for salvage parts, you are going to ruin the junk yard’s market and the price for salvage parts will go way up for the consumer.
    So forcing insurance companies to only use OEM parts will make it harder for you to find cheap alternatives since there will be no money in it for the suppliers. It’ll cause junk yards to disappear even faster than they already are. The price for OEM parts will go up to even more ridiculous prices. OEM parts, in general, are 25-50% or more expensive than the alternatives. And your policy premiums will go up to cover the cost differential.

    • 0 avatar

      The notion that you cannot get something for nothing will be a revelation to some readers.

    • 0 avatar

      A relative works in a body repair shop, and his complaint is that Chinese “knock-off” parts can be harder to fit, and it causes him to have to spend more time on a flat-rate job, so when fitting these parts, he can actually LOSE money on the job, while the insurance company makes out. He never complains about OEM replacements.
      He also stated that some insurance companies (cough GEICO cough) are more likely to substitute “knock-offs”.

  • avatar

    I remember when my Infiniti got rear ended in a small fender bender I learned how insurance companies try to screw you every step of the way.

    I first went to see the insurance agent for the person that hit my car, they offered me a check to settle the claim for around $130. Try and see how much bodywork you can get done for $130. My guess is though 1 in 10 take it because they need quick money.

    After I laughed off their offer, they then said I could go to one of their “approved” body shops. It was clear the place was a tiny step above a Maaco or Earl Scheib. I have some experience in body work, and it was clear they weren’t using real automotive quality paint.

    I ended up calling the Infiniti dealer and asked them where they sent their work. I think the rental bill alone was around $200 and made their insurance company pay for everything. I think the total was probably around $700. I almost went out of my way to make the whole experience as expensive as possible for them because I was so tired of being jerked around.

  • avatar

    I work at a Ford dealership, and generally fooling with insurance companies estimates are a pain. If an estimate has twenty parts, they’ll have fifteen different places to get the parts. Most of the time, their prices are wrong, if the salvage yard even has it. The parts will probably have to be repaired before installation. That said, I don’t really object to used parts, but aftermarket parts are awful. Our body shop has to make them fit, and of course the insurance companies won’t pay for the extra labor to make that fender look halfway decent. Aftermarket lamps seem to age very quickly, which means they appear dimmer than factory ones within a short time. If you compare an aftermarket chrome grill for a pickup with an OEM one, the chrome is very thin and wavy, and the chrome starts to flake off seemingly as soon as it is installed. The worst thing is that they say they’re cheaper, but it isn’t anywhere near 25-50% as they claim, especially on later model vehicles.

    • 0 avatar
      Land Ark

      I’m not trying to get into a whole thing, much of what you say is quite valid – especially about “chrome” parts and headlights.
      The issues I have is that with salvage parts the bodyshop charges (or at least the ones I worked with did) around 25% markup above the cost of the part for the time to repair them before install. That’s across the board, even on parts that are perfect when delivered. I would only check with 3 yards before moving on to new parts. I don’t know who has time to call more yards than that when you have to look at 12 cars today.
      With aftermarket parts, if there was work that needed to be done to get one to fit we were always told about it on a supplement and paid for it. I found that most shops that gave me a hard time about aftermarket parts were attached to dealerships, which was no surprise.
      And if we’re talking about large parts – hoods, bumper covers, doors – there is no disputing the price of OEM versus LKQ. Maybe electrical and smaller components come closer, I looked at WAY too many parts prices to be mistaken.
      Anyway, sorry, I got pretty jaded doing that job.

      • 0 avatar

        I don’t understand the complaint about 25% markup. You’re not supposed to make any profit on used parts? Not wanting to get in a big argument here, but you do know body shops make money on new and aftermarket parts, too, don’t you? Interestingly, we can usually sell new Ford parts for the same price as the aftermarket, and sometimes used parts too. Other oems have programs where they’ll match aftermarket prices if you fax them an estimate. We try to keep away from aftermarket parts as much as possible.
        I don’t know what insurance company you worked for, but I get diddly squat from insurance companies for problems with aftermarket parts.

        • 0 avatar

          The complaint was that it was a refurb/repair markup added to ALL parts whether work was done to them or not.

          I think the question to be asked is whether making everything a flat rate/percent averages out over time.

  • avatar

    Regardless of the parts – generic or OEM, after a bad one NVH is seldom the same again. I speak from experience. Its bad news if the body had to be straightened on the rack. As for added accident depreciation, if you lease then you don’t take the hit for an accident that wasn’t your fault. This applies well to residual luxury brands. Why would a used buyer choose an accident title over a clean one? Dealers don’t want them and usually pass off a trade to wholesalers.

  • avatar
    Volt 230

    Another reason to buy a well used car and if it gets banged up and totaled, so be it and don’t have to worry about driving a repaired car with questionable safety and quality, Not to mention buying a rebuilt title, that is really playing Russian roulette.

  • avatar

    I knew that after the wife wrecked the Pilot that the car’s resale value went out of the window. My car is US registered but the accident and the repair happened in Canada. I did it at a garage that I chose. It was about 5000 worth of damage…front bumper cover, headlights,, radiator, AC condenser and a front paint job. I insisted on OEM parts just because I was going to keep driving the car, not because of the trade in value. The local garage told me that their parts market is mostly OEM anyway being a little bit out of the way ( Nova Scotia). I did inspect the parts as much as I could and they are OEM Honda…unless they have fake labels. Two years later and everything is great. No complaints. It took forever for Liberty Mutual to pay the garage because their Canadian dollar funds came from Ireland…don’t know why, but that’s what the adjuster said. The garage knew it will take a while and they were ok with it from the beginning. I just gave them a check for the 500 bucks deductible. Of course my rates went up about 25% but that’s another story.

  • avatar

    I took an auto damage appraisal course, learned a bit about adjusting just for the heck of it with my buddy some years ago. I learned some useful stuff I will not forget, now I can read insurance estimates and tell friends and family if they are getting screwed. A few tips:

    – Take your car to the body shop where it will be fixed, have the adjuster appraise it there. If he tries to get a crap part or only pay for masking vs. dis-assembly for painting a good shop will call him on it right there. If you do a drive in or at your house it is cheap-out all the way.

    – If your car is nice you might get OEM parts. I just got a new OEM Lexus bumper for my 2001 ES300 this year (got backed into at Starbucks), because the adjuster was impressed with the condition of the car. If you make a good impression your nice old ride will get treated well. I live in MA, they were certainly not required to give me OEM parts.

    – Insurance puts the car back to pre-accident condition, not necessarily compensating you for all lost value. I guess you’d have to read the fine print of your policy as to whether they should be doing more.

  • avatar

    In my state by law it is the insured’s choice what parts are used. Of course, insisting on OEM parts may result in the car being written off. The insurance companies can try to influence you to go cheaper, especially if the accident was your fault, but they can’t force you to. Typically they will offer a rental car when one is not otherwise covered, or a “lifetime” warranty is offered on the repair if you do it their way. Ditto with choice of body shop.

    In my case, a couple years ago an idiot in a pickup pulled into a parking space in front of my parked Saab 9-3 and yanked the whole front end right off my car. I insisted on all new Saab parts – both headlights, bumper cover, various plastic panels, etc. Almost $4K with painting and very small amount of bodywork on the front edge of the fender. Headlights alone were $1500 of it, and they were the halogens, not the HIDs.

    • 0 avatar

      Headlight assemblies are ridiculously expensive these days, so they’re “low hanging fruit” for the knockoff industry – the replacements look good initially, but fade quickly. Given the choice, take a salvage replacement (in good condition) over a knock-off.
      It’s probably a good thing that headlight assemblies are deliberately difficult to replace, otherwise, they’d be a theft item – however, it increases the labor required to replace them.

  • avatar

    My wife’s SUV was hit last year in her work parking lot. State Farm wanted me to take it to a “preferred shop”, but I have one near me that I’ve used before and does really nice work (they do a lot of restorations). Anyway, State Farm only paid them to paint over a door next to a repaired quarter-panel, instead of to sand and repaint the door as it should have been done. (I have a shop in my family, and I hear this is common.)

    The shop actually did do the job correctly (sand the door), even though State Farm did not pay them to do so. So seems that a preferred shop wouldn’t have done so.

    Plus, since the shop was not preferred, State Farm would not pay them directly. They instead wrote me a check that I then wrote to them. Oh, and the adjustor originally left out some misc. trim parts that needed to be replaced.

    • 0 avatar

      The “preferred shop” route can be risky as the shop is taking direction from the insurance company and not you. I found one good approach is to take the vehicle to a body shop you prefer and tell them to estimate the vehicle for repair by the book (no shortcuts). The shop will initially ask about insurance or say the estimate will not be accepted by the insurance company, etc. Despite any protests, tell them to write the estimate and offer to pay for it. Later when you take you car to the Insurance Adjustment Center, the Adjuster will prepare an estimate for repairs. These Adjusters may or may not have body shop experience. Compare the estimate they prepare with the one you obtained. If there are significant differences, do not take the check and show the Adjuster your bid. Ask him to explain the difference and if can’t, tell him to increase his estimate so you can get the repair completed at your selected body shop. This has always worked for me. It is especially helpful if you have a sports cars, luxury car, vehicle with aluminum body panels, etc. because the Adjusters see fewer of these cars and have less experience estimating damage. The software they use also is more suited to the cars with the higher sales volumes.

    • 0 avatar

      Yep, insurance companies (and OEMs for that matter) hate paying for proper blends.

    • 0 avatar

      If I messed up and had an “at-fault,” a salvage OEM part wouldn’t be a problem. I pranged my 2006 Accord’s trunk on a contractor’s scaffolding unit, and my body shop took two tries to repair the “character line” on the trunk (even though their paintwork was as flawless as factory–not a run or drip anywhere to be found, and only a couple little bubbles! In hindsight, I should have had the body shop look for a decklid from a “front-totalled” Accord; as long as it’s OEM anything, it’s going to fit and look better than any LKQ part could!

  • avatar

    I am generally skeptical of expanding intellectual property, but the recent trend of automakers seeking design patents is going to help solve this cheap replacement part issue.

    If a design patent is in place that covers the headlight or fender (that was very rare until recently) then it cannot be knocked off.

    This is not all rosy though. The non-OEM replacement parts that new car buyers don’t want their insurance companies using are going to be the non-OEM replacement parts that people restoring cars are desperate are desperate for down the line.

    The really big way that insurance companies screw people is called comparative negligence. Most states used to have absolute negligence. You run a red light and hit someone, it’s your fault. But the insurance companies have been progressively lobbying for comparative negligence. Someone runs a red light and hits you, but you are going 5 mph over the limit, its 10% your fault. What that basically means is that the insurance companies get to screw you out of your deductible and raise your rates even the other guy really caused it.

    • 0 avatar

      That’s why Michigan’s “No-Fault” is “better”. Everyone is always at fault as far as far as the insurance company is concerned if you have the audacity to file a claim. Your rates are raised the same no matter what. Truly makes you happy.

  • avatar

    The only thing I didn’t see discussed was the pressure subrogation puts on insurers to keep costs down.
    Once they pay you for the repairs to your vehicle, they then have to take that estimate, photos, and police report and try to convince the insurance carrier of the person who hit you to pay up.
    If you got brand new doors on your rusty beater, the carrier of the at-fault party will balk at paying for it since the legal principal is to return your vehicle to its pre-accident condition.
    This means your carrier has to eat whatever they can’t convince the other carrier to pay, even after years of litigation. And they hate that.

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