Question
You pay your insurance premiums every month like a good boy or girl. You have your $1000 deductable in the bank for a rainy day. Then you get in a wreck and you figure, OK they'll fix my truck, I'll show up with my $1000 deductable and drive off, right? WRONG!
A common scam in the insurance industry is now to charge you betterment for parts. What's this? The insurance company contends that they are putting new parts on your truck and that the parts that were there were not new. Hence you should pay depreciation.
I recently ran into this with a claim for my truck. I managed to resolve mine. I told them to go out and find the used parts that I was not going to pay 1 penny over my deductable. What's even more shocking is that this scam is legal in some states. From some basic research I was able to find that it is legal in Florida, but it is not in Texas.
I suggest that drivers contact their state legislators and insurance commissioners and try and put an end to this thievery. No wonder people always want to rip off insurance companies.
Answer
The "betterment scam" is not a scam. Your insurance company is responsible to put you back into the same position you were it at the time of the accident, it doesn't mean that you are to profit from the loss. There are certain items that routinely are subject to betterment or improvement, such as radiators, batteries, paint jobs, tires, etc. These are items that when replaced are usually replaced with a new item and consequently, if a tire was 50% worn, a new tire would provide an improvement of 50%, so the insurance company may make an adjust ment in what they would pay on the tire. This would hold true on other items.
Keep in mind, if the vehicle is new, there is usually no issue. But on a vehicle that is 5 or 6 years old, some items may have exhausted these life expectancy, yet the vehicle itself has not.
You could liken this to buying a 5 year old from the dealer but paying the vehicles new selling price. You wouldn't want to do that and neither does your insurance company.
Answer
Oh, but it is a scam. The insurance companies obligation is to repair my vehicle minus my deductable. Repairs are generelly done with new parts. Do you go to your mechanic and say fix this vehicle but since the part that's broken is 4 years old, better stick another 4 year old on? No, the repair is done with new parts.
To make the scam worse, I have heard some companies (Progressive) are now using betterment on all parts, not just wear items. It is just another insurance industrry ripoff to screw you out of coverage you paid for.
Answer
Sorry, Gordon, I don't agree with you. If your vehicle is 5 years old and the bumper has sustained wear and tear during that time which may have a depreciated value of 50%, why should the insurance company give you a new bumper that has not sustained any depreciation? You are actually profitting from the claim, which violates insurance policy language and encourages a moral hazard.
Then on the reverse side, when the insurance company expenditures increase and a premium increase is implemented, most people wouldn't be too pleased to know its caused from the betterment of it's clientele.
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Yeah, but that betterment makes me incur a cost that I would not have incurred if no loss had occurred. The purpose of insurance is to prevent unexpected costs from arising out of a loss. Now all of a sudden I am paying for parts that only had to be replaced because I had a COVERED loss.
I know you have to take the party line on this, but it is just a ploy to try and shift the financial burden onto the insured and it is not right. It didn't used to be that way. And it is an outright scam. And by the way, it is ILLEGAL in the State of Texas.
Check this link. http://www.tdi.state.tx.us/bulletins/b-0014-0.html
Let's hope this case law makes it's way into other states eventually.
Answer
Gordon,
The bulletin you reference in Texas is for private passenger vehicles. I see no mention of commercial vehicles. This bulletin does a good job of explaining the "betterment", but keep in mind it is not referring to commercial vehicles.
And it's not that you are paying for parts that only had to be replaced because you had a loss, its because the parts your getting are "better" than what you had at the time of the loss. Thereby, the word "betterment".
While I understand your frustration with insurance (as I often have the same frustration), it is simple math and the effects trickle down. Income must exceed expenses if on is to continue in business. And somewhere down the road, WE ALL pay for it. That's just the way the system works.
We want the best of both worlds, We want the insurance company to pay for everything and not raise the premiums. That would work if this were a perfect world. But, it's not.