ICA Sean Shaw Discusses the Effect of Automobile Recalls on Consumers’ Insurance Coverage

Department of Financial Services, Consumer eViews Volume 7 Number 11

Posted on March 12, 2010

Sean Shaw, Insurance Consumer Advocate

The recent congressional hearings regarding the Toyota recall have led many consumers to have questions regarding their automobile coverage in the event of a recall.

Automobile recalls happen quite frequently, but not all recalls receive the notoriety and media attention the current Toyota recall is experiencing. Other companies that have issued recalls include Infiniti, Nissan, BMW, Honda, and Acura. Recalls often involve vehicles ranging from older models to current year models.

Consumers should remain alert for an announcement of any recalls affecting their model. There are many internet sites where consumers can check if a recall has been issued for their vehicle. The Office of the Insurance Consumer Advocate recommends visiting the National Highway Traffic Safety Administration in the U.S. Department of Transportation website at http://www-odi.nhtsa.dot.gov/recalls/recallsearch.cfm. There, consumers can enter their vehicle make, model, and identification number and receive up-to-date recall information.

Consumers who own cars that have been recalled should keep the following facts in mind:

• If a recalled part is determined to be the cause of damages or injuries, the insurance company will pay the claim without regard to the recalled part. Auto policy providers have indicated that accidents caused by a recalled part will be included in the vehicle’s liability or collision coverage.
• Insurance companies often seek reimbursement from the manufacturer for a claim that is the result of a manufacturing defect. Should the manufacturer pay the insurance provider, the consumer may get a fraction, if not all, of their deductible returned.
• Many auto insurance companies are currently in the process of sending notices to their clients confirming that they will receive the necessary coverage protection.

In response to questions regarding whether or not a recall will result in premium increases for recalled cars, a spokesman for Property Casualty Insurers Association (PCIA) stated that many factors determine premium rates and a recall may not be sufficient to trigger a premium increase.

In addition to other woes brought on by the recall, auto insurance companies that experience recalls may be charged higher premiums from warranty insurers; in turn, these costs may be passed on to consumers.

If consumers have questions regarding their auto coverage, they should first contact their agent or automobile insurer.

Consumers who have further questions regarding auto insurance coverage should contact the Division of Consumer Services within the Department of Financial Services online at http://www.myfloridacfo.com/Consumers/ or by phone at 1-877-MY-FL-CFO (1-877-693-5236), toll-free in Florida, and (850) 413-3089 from out of state.

The Insurance Consumer Advocate is appointed by Florida Chief Financial Officer Alex Sink and is committed to finding solutions to insurance issues facing Floridians, calling attention to questionable insurance practices, promoting a viable insurance market responsive to the needs of Florida’s diverse population and assuring that rates are fair and justified.