Toyota Recall Stirs Auto Insurance Companies and Consumers


The recall of an estimated 5.2 million Toyota vehicles due to floor mat problem and a pedal entrapment is causing a stir in the auto insurance industry. Add to this figure a 2.3 million recall of the same brand of vehicle because of problems on the gas pedal, and we have insurers and consumers wondering what long term impacts the incident would have on premiums and claims.

Toyota Recall Stirs Auto Insurance Companies and ConsumersAccording to a recent report, many insurers are currently piling-up paperwork in order to make Toyota accountable for millions of dollars which may be attributed to the company’s faulty design. In legal parlance, such a move is termed as subrogation or simply the act of substituting one creditor for another. Since motor insurance is basically an agreement to indemnify another in case of loss, damage or liability, insurance companies could subrogate claims to Toyota if it could be proven that the malfunctioning system on one of its sold vehicle is the root cause of the mishap. To put it simply, a consumer would collect from his insurer. In return, auto insurance providers may go after Toyota.

It must be noted that in the United States alone, 2.3 million cars featuring nine models had been returned to Toyota since the recall started. As such, reviews of claims are now being conducted by insurers.

As for the premium of Toyota car owners, Peter Moraga of the Insurance Information Network of California explained that such would only go up if there are significant numbers of claims attributed to the faulty gas pedals. He said that Toyota had traditionally been safe cars with a good safety reputation.

Basically, an insurance premium is determined only partially by the vehicle that one drives. A car’s claim history is also more determinative of the risk insurers would have to undergo and not lawsuits or recalls. With this, it would take years to really say if the current recalls would have an impact on rates and premiums.

Moraga also stated that if Toyota would quickly fix the problem, increase in claims would not continue. As of the moment, the car company is already shipping reinforced pedals for use by dealers. But much has yet to be seen. A hearing to be conducted by a House Energy and Commerce subcommittee would take place on February 25 and it would address the issue of how quickly the National Highway Traffic Safety Administration and Toyota responded to complaints regarding said gas pedals. However, Moraga stressed that the biggest impact yet by this recall is not on the auto insurance industry in general, but to Toyota itself and its reputation.