It is unfortunate that automobile diminished value appraisers throughout the country do such poor work. This has contributed to the public’s general notion that third-party claim reimbursements for inherent diminished value after accident repairs are difficult if not impossible to obtain. Insurance companies have created a number of boilerplate responses to claims such as “We are denying your claim because your appraisal was computer-generated”. This article illustrates common mistakes that consumers make when hiring independent appraisers.
- INVALID METHODOLOGIES
There are various formulas and algorithms that have been created to address diminished value claims. The first such formula was known as the 17c formula- created by an insurance company to essentially limit the amount of lost value suffered by vehicles that had repair histories. Algorithms are derivatives which are based on the same platform. They can be altered to influence their neutrality. The 17c formula takes 10% of the book value of your car and applies mileage and damage modifiers based on a scale. Insurance adjusters routinely challenge diminished value appraisals created using formulas or algorithms, knowing that these appraisals typically fail in court. Note that algorithms are proprietary and the decisions they make are largely opaque. There is currently no way to enforce standards for how formulas and algorithms are used by appraisers.
Comparing online asking prices to determine diminished value has three impediments to it’s validity. First, cherry picking comps by both insurance appraisers and independent appraisers illustrates how these searches can be tailored according to the client’s objectives. Second, these figures represent retail values which is not the market the consumer is in. The car owner would experience a loss when they sell or trade the car. Dealer asking prices are irrelevant. Third, since a dealer could ask any outlandish price they want at first, even for previously repaired cars, using their listings is a thoroughly unscientific approach. The asking price of a vehicle on the lot may not accurately reflect its true market value. This introduces a lot of subjectivity and uncertainty into the process.
Assessing the diminished value of a vehicle by comparing book value condition differences describes the shortest of shortcuts. It is a simple matter to declare that a vehicle has lost a certain value by subtracting the average trade-in price from the clean trade-in price but this has no semblance to what takes place on the ground. It is fundamentally unsound. Anyone can put together some numbers to reach a conclusion, but that is not science. Science requires in-depth investigation.
- LACK OF SUPPORT
Auto appraisal companies typically offer support but the level and type of support can vary depending on the specific company. Some companies will not provide assistance in resolving disagreements about the vehicle’s diminished value. If you are considering using an auto appraisal service, it’s a good idea to ask about the types of support they offer and ensure they provide the services you need. There should be no additional fees charged for acting as a consumer’s advocate. If customer service and post-appraisal support are essential to you, consider researching other appraisal companies that provide more comprehensive assistance.
- PUBLIC ADJUSTERS
The conventional agreement between public adjusters and their clients involves commissions to be paid as a percentage of the diminished value amount recovered. This calls into question the objectivity of the diminished value appraisal because public adjusters obviously benefit from greater recovery figures. Just the appearance of financial impropriety can cause an insurance company to deny claims. Magistrates may also have reservations about accepting their expert testimony as fair and unbiased evidence.
- INSURANCE CLIENTS – RED FLAG
Many independent appraisal firms work for both consumers and insurance companies which presents concerns about where their allegiances lie. Acquiring an insurance company as a client is more lucrative than a single car owner so the question of loyalty exists. Some appraisers may prioritize claims for insurers to secure repeat business. An independent appraisal company that works with insurance companies may face a conflict of interest, particularly if they are regularly hired by insurers to evaluate vehicles for claims. While independent appraisers are supposed to provide unbiased assessments, the fact that they work with insurance companies could influence their approach. This is something to be aware of if you’re using their services for an insurance-related issue, such as a diminished value claim or a total loss dispute. Look for appraisers who are not affiliated with insurance companies and who specialize in unbiased, independent vehicle valuations for consumers.
- CREDENTIALS
While it is not necessary to hold any license or certification to prepare diminished value reports(Except in North Carolina), an appraiser’s credentials go a long way to establishing their expertise and trustworthiness. If an automobile appraiser is licensed in any state, they have completed extensive background checks, undergone testing to demonstrate their knowledge, participated in continuing education classes, obtained surety bonds and, most importantly, face a loss of licenses for financial impropriety or other wrongdoing such as DUIs. Another category of automobile appraisers is certified auto appraisers. Unlike appraisers who are licensed by government entities, certified appraisers simply pay a yearly fee to private organizations such as the IAAA, ASA or ISAA to become “certified”. This credential is far inferior to that of a state-issued appraiser’s or adjuster’s license.
- COURTROOM EXPERIENCE
If an automobile appraiser has not been accepted as an expert witness in a court of law, the insurance company defense team is sure to make an attempt to disqualify them as qualified experts in the field of automobile diminished value claims. Should the consumer’s insurance claim progress to the litigation stage, an ill-equipped, inexperienced appraiser becomes a liability. Comprehensive trial preparation in the event of litigation is crucial. As a vehicle owner who has been forced to take this route, seeing this disadvantage result in a judgement for the defendant compounds the feeling of disappointment. Ask any auto appraiser under consideration to produce a transcript of courtroom testimony from a judge showing that they were found to be qualified. It is also important that a judge has accepted the appraisers methodology as sound and admissible evidence.
- REVIEWS AND TESTIMONIALS
While online reviews can be faked, a careful study of how customer’s comments are worded can help separate authentic reviews from fake ones. The Better Business Bureau, for instance, does a thorough vetting of reviewers before publishing their ratings and opinions. Other dependable sources of reviews can be found in the various discussion groups such as Quora or those that cater to owners of particular makes and models of cars and trucks. Be advised that some of the larger “billboard appraisers” that advertise heavily on Google and Bing offer rebates to customers in exchange for writing five-star reviews.
- SOLUTIONS
It is of paramount importance that the consumer provide accurate, unbiased evidence of diminished value that can not be impeached. Hire a state-licensed auto appraiser. State-licensed auto appraisers hold a higher level of authority and oversight compared to those with certifications from organizations like ASA, ISAA, or NAAA. While those certifications are known within the industry, they do not carry the same legal weight or specific regulatory oversight that state. licensure provides. Seek the services of an independent auto appraiser who prepares diminished value appraisals by doing real-world research instead of relying on short-cuts. Querying multiple new car dealers provides valuable insight into the market that can not be gained by concocting formulas and algorithms, doing computer searches and book value comparisons. Dealers are experts in the buying, selling, trading and auctioning of cars. Their opinions help to confirm that the appraisal is evidence-based. These insights are critical to a successful program and require a lot of time-consuming research on the backend to return a consistently reliable data set.
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