by MAURA KELLER
As the hurricane season gets underway, all eyes turn to the recovery and cleanup within the North Carolina region.
Recent Hurricane Florence’s deadly destruction wreaked havoc on homes and autos alike. According to David Wu, chief executive officer of VinAudit.com, his company estimates that flooding from Hurricane Florence affected 7,000 to 14,000 vehicles in the North Carolina area, based on correlating satellite flood data from the Dartmouth Flood Observatory.
“In contrast, this same methodology yields an estimate of 400,000 to 800,000 vehicles damaged by Hurricane Harvey, so we estimate that Hurricane Harvey had around a 50 times greater impact on vehicle flooding than Hurricane Florence,” Wu said.
Likewise, Anil Goyal, senior analyst at Black Book, a vehicle value tracking firm, said the company estimated Hurricane Florence wrecked about 20,000 vehicles, thanks in part to lower populated areas most affected by the hurricane. The vehicle density within the path of Florence, from Savannah, Georgia to Norfolk, Virginia is approximately half of that of Houston, which was drastically affected by Hurricane Harvey.
As Susanna Gotsch, director, industry analyst for CCC Information Services Inc., explained, the population of the affected areas was smaller than the areas impacted by other storms, which were similar as it relates to extreme rainfall – i.e., Harvey (Houston) and Sandy (New York and New Jersey metro).
“Subsequently, from a vehicle perspective, we expect fewer overall totals since many people were able to evacuate and there are just fewer people and fewer vehicles in the affected areas,” Gotsch said. “We estimate there may be about 15,000 to 20,000 insurance-paid, totaled vehicles from Florence, versus 160,000 from Hurricane Harvey.”
CCC works with more than 350 insurance companies and more than 24,000 repair facilities. Consider that without the comprehensive total losses from Hurricane Sandy, the average total loss value for November 2012 was only $8,279. With the Sandy losses included, the national average jumped to an average of over $11K. This superstorm resulted in more than 160,000 auto losses.
However, as Gotsch explained, the vehicle mix within a given geographic area can lead to much higher or lower loss costs. For example, analysis of total loss vehicle valuations by CCC Information Services shows the mix of vehicles in the areas impacted by Sandy included more newer and non-Domestic vehicles. And, when compared to other events that occurred in Louisiana and Florida, the average comprehensive total loss valuation was over $15,000 versus about $9,000 to $10,000 for the other major events.
Understanding what the likely market value of vehicles underwritten in a given zip or county impacted by the storm helps insurance carriers to quantify the likely loss costs of those claims.
For example, CCC Information Services’ analysis of 2017 year-to-date losses in the areas that saw the most impact from Harvey revealed that values of vehicles are slightly less than those in the areas impacted by Sandy; however, not by much.
Generally speaking, as Wu explained, a vehicle is considered as a total loss if the insurance company determines that the damage on the vehicle prevents it from being safely or cost-effectively repaired, either independently or according to state regulations.
“North Carolina has a 75 percent damage threshold, meaning that vehicles which require over 75 percent of the vehicle’s fair market value to be repaired are required to be considered as totaled by the state,” Wu said. “The process typically depends on how quickly the insurance companies can assess claims related to the flood damage and update the vehicle’s status with the state DMV.”
As Gotsch explained, insurers and salvage companies have streamlined operations, especially for flood vehicles. “In the case of Harvey for example, many carriers were simply requesting the customer take pictures of their vehicle showing water above the rail line, and they would arrange tow and start the total loss process,” Gotsch said.
Once a vehicle is considered totaled, the insurance companies typically have the vehicles towed to a salvage auction facility such as Copart or Insurance Auto Auctions (the two largest salvage auction companies), where the vehicles are auctioned off to the highest bidder.
“While many of the auctioned salvage vehicles are properly used for parts or scrap, some of those flooded vehicles end up being repaired and returned to the market,” Wu said. According to data compiled by VinAudit.com, over 16,000 vehicles that were likely impacted by Hurricane Harvey have been listed for sale in popular online marketplaces like Craigslist, eBay, and AutoTrader.
“In some cases, these vehicles are listed for sale with no disclosure of the previous flooding,” Wu said.
Generally speaking, Wu stressed the National Motor Vehicle Title Information System (NMVTIS), a federal database administered by the US Department of Justice, is the best available database for monitoring vehicles affected by flood damage. It is the only nationwide database where state DMVs, insurance carriers, and salvage entities like Copart and Insurance Auto Auction are required by law to report.
“As DOJ enforces these reporting requirements with threats of fines of up to $1,000 per VIN, NMVTIS has the most comprehensive coverage available for total loss and salvage vehicles with over 9,000 entities reporting over 15,000,000 records per year,” Wu said.
That said, the auto loss/salvage process as it relates to hurricanes is fairly complex. For instance, the claims process with insurance companies, where consumers and insurance companies need to settle on total loss value for the vehicle.
The reporting process with states varies from state to state and the liquidation process for the vehicles, where flood-damaged vehicles are being sold, repaired, and relisted online on a large scale.
“My hope is that this process can be simplified to offer greater consistency and greater transparency to affected consumers,” Wu said.
Understanding what the likely market value of vehicles underwritten in a given zip or county impacted by the storm helps insurance carriers to quantify the likely loss costs of those claims. For example, analysis of 2017 year-to-date losses in the areas that saw the most impact from Harvey revealed that values of vehicles are slightly less than those in the areas impacted by Sandy; however, not by much.
Published in the November 2018 Edition