Insurance and recalls


If you keep up with the news, you will have seen Ford issued two more recalls of almost 140,000 2013 Escapes in the US. It seems they can catch fire so the company is now proposing to change the shielding around the engine and to modify the fuel lines. For those of you keeping count, this will be the seventh recall when it was discovered that some of the garages working on the last recall had incorrectly installed the fuel lines. This November also sees Volkswagen recalling 2.6 million of its vehicles around the world. Following Ford’s example, these cars also have leaking fuel lines but, so far, they have not been bursting into flames. While neither recall matches Toyota’s recall of 10 million vehicles in 2009/10 because it was feared the accelerators might be sticking, they are part of a wider trend which sees manufacturers putting safety to the fore.

Manufacturers now judge the damage to their brands is greater if they allow people to continue driving potentially dangerous vehicles. Recalls are now shown as positive benefits for consumers.

What’s the effect on insurance?

In most cases, it’s just bad luck when the vehicle we buy breaks down. Anyone can get a malfunctioning part. But that’s not the whole story. The National Highway Traffic Safety Administration oversaw 752 safety recalls in 2012. This affected almost 18 million vehicles. That’s a lot of recalls! Usually, you don’t have to take your vehicle in specially. The work can be scheduled when you take your car in for its regular servicing. So what effect, if any, do recalls have on your insurance rates?

The theory

A recall is not like a claim. The insurance company does not have to pay for the repairs — the bill is picked up by the manufacturer. Once all the work is done, your vehicle should be safer than before and so the risk of a claim is reduced. But to protect yourself, you should document all the repairs which are performed. Should you be involved in an accident and your vehicle is totaled, negotiations for the fair value will depend in part on showing the state of your vehicle. That it was in the best possible condition is essential if you’re to maximize the value of the claim. If the cause of the accident was a faulty part installed by the service garage or the manufacturer, your insurer will be able to claim repayment. In theory, because your car is now safer and may reduce the insurers exposure to risk, you should pay less.

The reality

Your rates will rise if you ignore the recall. You could have made the car safer. You failed. That makes you a higher risk driver. But the longer term problem is that the insurer may decide your make and model’s safety record is too poor. Owners of Ford Escapes may well find their rates rising as the risk of fire becomes more clear. If you’re looking round for a new or secondhand vehicle, avoid buying a model with a history of recalls. If you’re still tempted, get proof all the necessary work was carried out before you buy.

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