Has the IIHS killed the market for small cars?

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Life is never clear cut when financial interests do not coincide. It would be good for consumers if there could be objective testing by a genuinely independent body with reports giving a fair and honest assessment of the results. Sadly, that’s never going to happen when millions of dollars can rest on the outcome. So when it comes to motor vehicles, we have the federal government on one side. It acts through the National Highway Traffic Safety Administration (NHTSA). On the other, the Insurance Institute for Highway Safety (IIHS) comes riding into the fray with a different set of results. Which set of results should you trust?

Well, here’s the problem. The NHTSA licenses the manufacture of vehicles in America so tens of thousands of jobs ride on the government keeping the manufacturers and parts suppliers in profit. If the NHTSA keeps bashing the reputation of local manufacturers and jobs are lost, the government is going to lose votes in the affected states. Worse, many of the manufacturers make campaign contributions and lobby the individual representatives and senators. It’s difficult to maintain objectivity and neutrality in such a situation. The IIHS is supposed to be a free-standing, not-for-profit organization. But it’s run for the benefit of the insurance industry. It has a completely different agenda when it comes to designing tests to establish the safety of the vehicles its paymasters will be asked to insure. If the IIHS finds some designs less safe, you can guarantee the annual car insurance rates will rise when the next round of quotes comes your way.

You had to choose whether the federal government or the insurance industry would be more honest, you would bet on the insurers to find all the faults. The profitability of the insurance business model depends on the accuracy of the risk assessments you will get into an accident and make a claim not just for damage to the vehicle, but also for medical expenses. Ah, now you see the importance of crash testing. If the insurers will be on the hook for paying medical expenses, it has a direct interest in designing real world crash tests to establish which vehicles give the greatest protection to the driver and passengers. That’s why you should pay particular attention to the latest set of findings:

The IIHS failed ten of the eleven small cars in the most recent round of tests.

So here come the two reasons for you to buy a small car:

• the retail prices are lower; and
• the cars are lighter so you get better fuel economy.

But although you save money when you buy and they cost a lot less to run than larger vehicles, they are less safe to drive (apart from the Chevrolet Spark from General Motors which passed the tests):

So these smaller cars appeal to younger buyers who can’t afford the bigger models or the higher gas costs. The industry needs these buyers, so it will have to react fast or it will lose a major part of the market. Drive more safely thanks to the car insurance industry!

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