When Lakshmi Subramanian took her brand new Renault Lodgy, damaged in the floods, to her dealer for repair, little did she know that she would be running the risk of losing her car and paying an extra `1.5 lakh to settle her loan. But that is exactly what the dealer and the insurance firm wanted her to do — a situation faced by many in the city as service centres prepare estimates that run into lakhs.
“The car is brand new and was bought for `14 lakh. The IDV (Insured’s Declared Value) was `10 lakh because that was the loan amount. When we took the car to the service centre, we were told that the repair estimates came to `18 lakh and that the car would be declared a total loss,” she told City Express.
Declaring a car a total loss can be devastating to any car owner, especially when they are left with limited options to claim any part of their insurance.
One, give up the car and accept whatever the insurance company decides is their liability. Usually around 70-75% of the IDV minus depreciation. Or two, choose to retain the car, make their own repairs to damages, and accept whatever the insurance deems is their liability. Again, 70-75% of the IDV minus the wreck value. And yes, once the car is declared a total loss it becomes a ‘wreck’ in insurance jargon.
In Lakhsmi’s case, she was asked to give up the car and told that the insurance company would foot around 85% of the IDV. “But I would have to pay another `1.5 lakh to settle the loan and would be losing about `5.5 lakh in total,” she said.
Lakshmi’s is not an isolated case, primarily because authorised service centres are providing estimates running into several lakhs. “My Hyundai Santro is insured for somewhere around `2.5 lakh. But the service centre said that the car would have to be a total loss because the assessed repair cost was more than 80% of the IDV. I chose to pull back from the service centre and I am getting it repaired through a local mechanic for less than half the estimate,” said R Ashwin Kumar.
This is an option that many are turning to as service centres insist on repairs that involve a lot of replacements. “It is company policy. We do not generally repair things, we replace them. It results in a lot of extra costs to the customer,” admitted a service consultant.
But will insurance firms back customers who want to get repairs done outside? “If they want to take their car to a local garage, we will still pay what liabilities we have after a surveyor assesses the damage,” assured Vijay Kumar, Chief Technical Officer, Motor, Bajaj Allianz General Insurance.
“However, we would advise them to stick with authorised service centres because the framework to deal with claims quickly has been decided between manufacturers and insurers,” added Pankaj Verma, Head — Claim Operations, SBI General Insurance.