How Do Car Insurers Figure out Market Value?

aj01 on 20/09/2022 - 16:01
Last edited 20/09/2022 - 16:02

Howdy all, I am just curious if anyone has knowledge on how an auto insurer figures out market value? Do they use redbook or their own data and sources?

I am aware of the concept in market vs agreed however trying to figure out if I can save a lot by going market, which I rarely ever have. But in this scenario it may work.

For example, lets take an early 2000's Holden Commodore SS V8 models. The most you can get to an agreed value sits on average at 9k with the major insurers. Only Allianz offers a bit more, but strangely does not offer market value as an option at all.

Choose market value and the premium amount drops in all instances, such as NRMA, $200 cheaper per year for market value compared to 9k agreed.

The marketplace and interest for Commodore and Falcons, especially v8's has gone upwards for the past few years. Would of been lucky to get 6k agreed value 3 years ago.

My concern is that they are still looking at this with the old thinking, yet redbook is stating the minimum sale value is sitting at 12.5k-15k for private sale? I am just concerned going this way because I would have thought surely they are on top of the value of these sorts of Aussie cars going up over the past few years?

Is there something I am missing here or are they just taking the risk and/or not done their research?

Thank you.

Automotive

Comments

  • Bid Sniper on 20/09/2022 - 16:10
    +1

    Talk with them, agreed value is a value both parties agree on.

    Was in a similar situation with my WRX STI, prices skyrocketed, rang up Shannon's and agreed to raise the value of the car and my premium…

    • baronorder on 20/09/2022 - 17:59
      +3

      Don't rely on this as my father had two different disabled modified vehicle insured with NRMA and another insurer (APIA I think) for agreed value due to the modifications being worth several times the market value of the vehicles in question. Both times the vehicles were involved in not at fault accidents and both times the insurers invoked their right to reevaluate insured value upon a claim.

      The NRMA one I remember resulted in the vehicle being taken from an agreed value of almost $50k due to the $38k of disabled modification (they basically cut the entire rear end, add a ramp, modify the chassis to add heavy duty anchor points, redo the floor pan, redo fuel tank, change exhaust routing and have the changes engineer approved etc) and offered to cut him a $10k cheque after the claim costs. The other party insurer also refused to entertain the idea of paying the agree value and forced us to go through our insurance to claim. It took 2 years, multiple lawyers and even a major news outlet doing a story on the claim to finally get NRMA to agree to a fair pay out.

      Also in support of this point - I recently I had a vehilce written off due to storm damage and the market value that Shannons came to was $9k when the cheapest same year/model avaiable on Carsales was over $13k and the cheapest similar vehicle in my state was well over $16k at the time. Do not trust an insurance company when it comes to market value at the very least and carefully read the small print of the policy to check to see if there is a weasel worded way they can revise the value at claim time if you have agreed value.

  • Drakesy on 20/09/2022 - 16:11

    It goes both ways.
    They could use redbook, alternatively you can go onto Carsales/gumtree/marketplace and get evidence from that.

    But yeah, its all open to interpretation.

  • Euphemistic on 20/09/2022 - 16:12
    +1

    are they just taking the risk and/or not done their research?

    Insurance companies dont take risks and they do lots of research.

    • jv on 20/09/2022 - 16:15
      +9

      Insurance companies dont take risks

      Huh ?

      That is the whole point of their business…

      • dogboy on 20/09/2022 - 16:45

        Exactly. It is all about understanding the risk profile.

      • Euphemistic on 20/09/2022 - 18:13
        +1

        They take highly calculated risks, they don’t step out into traffic without looking.

        • jv on 20/09/2022 - 18:27

          Insurance companies dont take risks

          and

          They take highly calculated risks

          So which is it ???

          • Euphemistic on 20/09/2022 - 22:11

            @jv: No idea. Can’t work it out.

            Some people say they don’t take risks, but what they actually mean is that they do what they can to mitigate risks. Crossing the road is a risk. Eyes closed, big risk. Stop, look both ways, listen, then cross - little risk (or ‘no risk’ despite there still being SOME risk)

            Insurance companies don’t take big risks, they spend a fortune on actuaries (maths nerds) to calculate how much to charge for a policy based on how much they need to pay out based on lots of statistics. The minimise their risk exposure by collecting more money than they give out.

            • jv on 20/09/2022 - 22:51

              @Euphemistic:

              collecting more money than they give out.

              So you lose money if you use them?

  • Yuddenator123 on 20/09/2022 - 16:56
    +1

    They've got their own methods, i used to work for one but in the commercial fleet space rather than domestic.
    It doesn't really make much sense to be honest. Like even in todays market where there is a total writeoff the market value was at least 15% lower than the actual affordability to purchase a like for like car in the same market.

    It's all done by actuaries so unless you get one of them here its tough.
    Factor such as Make, model, availability of parts, repair costs, agreed repairers all factor in.

  • donga100 on 20/09/2022 - 19:34
    +1

    They will use whatever method they can think of to rip you off and offer the lowest amount possible. Never take market value on insurance, always agreed value.

    • kerfuffle on 20/09/2022 - 19:50

      To be fair, right now is a pretty good time to have it at market value thanks to high waiting times for new cars.

      Source: Got paid $13K for my 2011 Corolla Conquest sedan when it got written off in April; had it insured at market value. 100K km. Would not have fetched that pre-pandemic

      • Euphemistic on 20/09/2022 - 22:20

        But you still need to buy in this market, so it’s not a big benefit to collect more. It’s only a good thing if you aren’t replacing the car.

  • randomusername2017 on 20/09/2022 - 23:22
    +1

    They list the vehicle on gumtree for what they think is market value and their offer to you is derived from the average of the first 10 offers they receive

    • donga100 on 22/09/2022 - 12:36

      Even if the offers are from people currently working on offshore oil rigs?

  • Hackney on 21/09/2022 - 08:51
    +1

    It all comes down to location, theft rate on a particular brand, etc…How expensive to repair as well.

  • vodamerc on 23/09/2022 - 21:09

    Redbook is not the 'market', they don't buy cars. Market value is what people are willing to pay. The best indication of that would be advertised prices of the same car.

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