Auto Recalls Unlikely to Affect Auto Insurance Premiums


FANCY-00024100-001Pennsylvania Insurance Commissioner, Joel Ario, commented on the recent auto recalls, PRNewswire-USNewswire reported on March 15, 2010. The Commissioner explained that the auto recalls might not impact auto insurance coverage. At the same time, he advised auto owners to respond promptly to the recall notices issued by the vehicle manufacturers.

The Commissioner pointed out that fresh information about safety problems in certain cars were surfacing nearly every week, increasing the concerns of auto owners and other car users about the safety of cars and the impact of such recalls on their auto insurance premiums. He revealed that insurance companies would not be able to cancel the present coverage or deny any claims, merely because an individual was driving a recalled vehicle. In spite that, the consumers should immediately respond to the recall notices by the manufacturers and have the cars serviced promptly, he advised.

There is a good amount of truth in the statement of the Commissioner that the auto insurance companies would not change their policies due to vehicle recalls, since these are regular occurrences. Over the years, auto insurance companies had been facing such situations and managing them diligently, without causing undue disturbance to consumers.

However, if a particular individual had not responded to a car recall notice and had the vehicle properly serviced to rectify the cause for the recall, it could be construed as gross negligence by the car owner. Normally, the automobile should be sent back to the factory within a reasonable period. If the auto owner failed to do so and an accident occurred, the insurance company would have the right to refuse or contest the claim against the accident, maintaining the failure to comply with the recall notice as a contributing factor for the accident. Moreover, the auto insurer could refuse to renew the premium or increase the premium of such a car owner, when the auto insurance policy came up for renewal.

It is a normal practice for auto insurance companies to use the rating of the auto models, the actual safety and performance aspects of the vehicles, and the cost of repair of the vehicles to decide on the premium. The insurance companies could re-file the model ratings with the department, when a recall occurs. In the recent Toyota recall of vehicles, the insurance companies had not done any ref-filing until now. If the company replaced the necessary parts in all the affected vehicles, then the insurance companies might not lower the rating of the Toyota model at all. The premium on liability insurance would not be affected by vehicle recalls. However, such recalls could affect the collision and comprehensive portions of coverages.