Thoughts on Car Appraisals

[roadrunnerron]

I recently had occasion to be at my buddies when his cars were being appraised for insurance purposes i.e. it was a requirement of the insurance company.

Before going further into the topic, I’m from the industry and know it very well but I’m long since retired. My buddy mentioned to the appraisor that my insurer did require appraisals and asked the appraiser about his thoughts on the subject. My buddy did not identify who I was insured with.

His reply was to criticise the Hagarty vehicle appraisal system for it has led to two situations. Firstly, if you overvalue your car (class one vrs class 3) and it is discovered you will be charged with fraud. Secondly, if the vehicle suffers a partial loss is $45 per hour (the going labour rate here is about twice that) with the result that you are paid only for half your loss.
I said that I found that hard to believe. Such practices would move through car forums PDQ and everyone would know about it. I haven’t seen anything yet.
My take on the situation:

• The Hagarty valuation system produces reasonable numbers and is an automation and friendly formatting of the same information appraisers use to come up with their values. In short, Hagarty has built a better mousetrap and obsoleted the appraiser to some extent i.e. the appraiser is a victim or technology. A reasonable number is good enough. The real value is what someone will pay for your car and that happens sometime in the future.
• I suspect that the $45 per hour applies to situation where the insurance customer want to do their own repairs and is derived when profit and business overhead is taken out of a typical shop rate which I except as a reasonable practice. In short, the appraiser massaged the truth to make his point.
• Fraud is a possibility but pricing mechanism works against that scenario. If you overvalue a car, you end up overpricing your insurance. Let’s not confuse fraud with “permitted puffery.” Permitted puffery is the negotiation practice of modestly puffing your selling price expecting to be negotiated downwards to your real selling price. Fraud is different and is a criminal offence in this country.
  

In my opinion, the appraiser cannot compete with the Hagarty valuation system for the more common collectible car and fearing erosion of his business is badmouthing competition. Not once did he mention that the value added is that appraisals allow more insures (not part of the Hagarty carriers) to quote for your insurance i.e. appraisal promote competition.

Any other thoughts on the subject?

 

[Lionized]

Don't insurers need something valid/on paper when it comes to appraisals?
I can't just walk into ICBC and tell them my car is worth X number of dollars because some website appraisal service told me it is.
Or can I? I'd rather not spend the $3-400 appraisers charge if I don't have to.

 

[1969CoronetR/T]

My insurance company would only appraise my R/T to $50,000.00 unless it was appraised. I had it appraised and it came back at $49,000.00. It it worth about half of what I have in it...

 

[mmissile]

Hagerty didn't question my latest agreed-value for one second. They have a good idea what the market will command for a nice car. I got 100K insurance over the phone, in about 10 minutes.

 

[Darius]

I had mine appraised so I would know what THEY think it is worth. Hagerty accepted that document as gossiple and insured me for "agreed price" no questions asked. Appraisal was for $152k!
This cost me about $1700 per year and that seems steep but how much does it cost through ,say State Farm or the like, to insure a new car that had a sticker price of $40k?????

 

[roadrunnerron]

Don't insurers need something valid/on paper when it comes to appraisals?
I can't just walk into ICBC and tell them my car is worth X number of dollars because some website appraisal service told me it is.
Or can I? I'd rather not spend the $3-400 appraisers charge if I don't have to.

Government insurers such as ICBC are not part of the Hagarty system. Couple of questions for you. Run the Hagarty numbers and see how close it is to your appraised numbers. If accurate, ask ICBC if they will accept the Hagarty estimator numbers (assuming you except them as accurate) in future. The worst that ICBC can do is say no. If they say yes, you save yourself $300-$400.

- - - Updated - - -

I had mine appraised so I would know what THEY think it is worth. Hagerty accepted that document as gossiple and insured me for "agreed price" no questions asked. Appraisal was for $152k!
This cost me about $1700 per year and that seems steep but how much does it cost through ,say State Farm or the like, to insure a new car that had a sticker price of $40k?????

Hagarty doesn't require appraisals. They accept values from their estimator. If the estimator is reasonably accurate, why spend $1700 per annum on appraisal services?

 

[Bruzilla]

I think the whole classic vehicle appraisal system is pretty much fraud based. New car insurance is based on a pretty solid and objective MSRP. There is no equivalent valuation for classic vehicles as all valuations are not only subjective in nature but also in constant fluctuation.

As we saw in the late 1980s, many car values were set based on auction prices. If a car sold for auction at $10k, the value of the car was $10k. If the same make/model/year sold for $20k the next week, the value jumped to $20k with little regard for the natural ebb and flow of what things sell for at auction resulting from who's doing the bidding. Worse, once this method of benchmarking prices became more and more accepted, the use of shill bidding and unrealistic reserves drove values far beyond what they really were. By the time these artificial value drivers were uncovered and eliminated, much of the market had already accepted the artificial values as gospel and that's how we got the mess we saw from 1988-2008.

Now the market is headed in the opposite direction, and folks who bought at top-of-the-mark prices are desperate to protect car values for as long as possible, and we're again seeing a lot of unrealistic valuations. And just as the early auction houses helped this process for their own gain, we're now seeing Haggerty and other specialized insurers doing the same.

A frequent discussion on this forum has been Haggerty's unrealistic valuations when it comes to appraising values for our cars. Their online tools generally determine a value that's between two and three times what similar cars are actually selling for. This is especially true of "replacement" values as they tend to factor in not only the cost of the vehicle but also the time and effort to locate and acquire a replacement. I used the Haggerty tool to get a value for my latest Roadrunner, and found it was three times what I knew the car was worth or would cost to replace. When I got a follow up phone call from Haggerty, the gentleman I talked to made a very earnest effort to get me to up the covered value of my car, again to about triple the actual value. The pitch was it could cost me that amount to find a replacement, which could be true, but I knew the market well enough to know what cars were out there, the prices they commanded, and how long it would take to get one.

So I suspect the truth is their goal is to value your car as high as possible in order to get you to pay the maximum amount they can. This is a great business model for them because they know they aren't insuring Joe Sixpack with his beater, or Jim Teenager with his hopped-up ricer. They are insuring older experienced drivers who are driving cars they are highly protective of and use on a limited basis. Their risk is beyond low. It's in the cellar, and the more they can get a customer to pay the more they make. And the best way to get clients to pay more is to convince them that the cars they adore are worth more than they are.

Lastly, the business with fraudulent values is fraudulent in itself. There is no objective values for these cars, so proving fraud is a fools errand. These cars really are worth only what someone will pay for them, and for every documented transaction of someone paying $10,000 for a make/model/year it's not hard to find another where $50,000 was paid. This is why insurers like Haggerty love "agreed upon values" as that takes all the guess work out of the process. Their only challenge is to get you to agree to the highest value possible so you'll pay the highest premium possible... and thank them for the opportunity to do so.

 

[mmissile]

I'm very comfortable with that. My cars cannot be replaced, and coverage is minimal compared to the thieves that insure the rest of my regular vehicles.

 

[Sonny Black]

my Insurance co. will only go 22,000. on mine...BUT how can I replace it for that I have a lot into it I would NEVER get out.:icon_confused:
I don't know if I could even sell it for 22K???.....BUT it is my baby and I would just want it replaced or fixed!

 

[Darius]

I don't spend $1700 per year on appraisals. I spent $250....ONE time! The premium for the car at my appraised value is $1700 per year. Hagerty has about 100 pics to prove it with their copy of the appraisal so they can't argue what it had on it if it comes to that.

 

[Bruzilla]

I'm very comfortable with that. My cars cannot be replaced, and coverage is minimal compared to the thieves that insure the rest of my regular vehicles.

That's because all Hagerty and other collector car insurers are covering is damage to your vehicle. The thieves are covering your vehicle plus liability plus PIP in most states. That's why the thieves are charging more.