How Total Loss Value Is Determined
Our insurance commissioner’s office (ICO) has historically been very consumer oriented in their oversight and regulation of total loss claims. Many years ago, insurance carriers consistently tried to underpay these claims. They followed a pattern of seeking low cost bids and, after determining value, willfully offering less than true fair market value with an eye toward buying your vehicle at the lowest possible price. This approach is now disallowed under ICO regulations and the North Carolina Administrative Code (NCAC).
Any insurance carrier handling a total loss claim must now complete a thorough, fair market value appraisal of the subject vehicle. This requires the insurance carrier to look beyond value guides, such as the Kelley Blue Book and the National Automobile Dealers Association / NADA Guide. This value appraisal method is somewhat similar to a real estate appraisal. The adjuster must look into the community’s used car market and locate vehicles that are for sale or that have recently sold that are the same year, make, and model as the subject vehicle. They are also looking for the same engine and options package and similar mileage and condition. Identical vehicles are rarely available. Thus, insurance adjusters must make value adjustments to allow for differences between comparable vehicles and the vehicle being appraised.
Essentially, the insurance carrier must do enough homework and collect sufficient evidence of vehicle value to be prepared to attend a trial to prove the true fair market value of your vehicle. Once these steps are undertaken, they are then required to extend the full fair market value in their total loss offer. For this reason, insurance adjusters are typically nonnegotiable in the total loss claim. If they have done proper homework, they should be extending a true fair-value offer and negotiation would not be necessary.
Claimants facing total loss offers typically do not need legal representation. This is because the insurance commissioner’s office has taken away the insurance companies’ opportunity to undervalue these claims. While insurance adjusters used to commonly underpay total loss claims, the law now forbids this. Please do not credit the insurance company for their fairness. Our insurance commissioner legally forced insurance companies to handle these claims fairly to overcome an established pattern of unfair claims practices in the total loss arena.