Guest View: CARCO Exec. Responds to Insurance Advocate Columnist Re: Reg 79

CARCO Exec. Responds to Insurance Advocate Columnist Re: Reg 79

By Jim Owen, President, CARCO

Arecent article in the “Advocate” proposing repeal of the New York vehicle photo inspection regulation (“Regulation 79”) should be welcomed by those that steal cars, sell cars that were damaged by Superstorm Sandy, and prey upon unsuspecting consumers.

Contrary to popular belief, Regulation 79 only applies to 8% of the vehicle population in New York. This small subset of the vehicles underwritten in New York is essentially comprised of used automobiles where the insured has been with the carrier for less than 4 years and where physical damage coverage is desired. This subset was carefully selected based on the likelihood of fraud.

The article claims that the photo inspection Regulation was “not as successful as we had hoped,” yet provides no citations. What actually happened after implementation of Regulation 79 proves otherwise:

For the period 1978 – 1979 immediately following the Implementation of Regulation 79

[Testimony of Deputy Superintendent Richard Hsia, NY State Insurance Dept., March 1990]

Regulation 79 forced the criminals to move out of New York. It keeps them out of New York! Criminal activity is highly fluid and, absent proper safeguards, will just as easily move back into New York if Regulation 79 is killed or made optional.

Since the inception of the program, theft rates have consistently declined. This is due to the inspection program acting in concert with other fraud fighting programs, such as improved theft deterrent devices and better policing. Theft rates nationally have decreased by more than a factor of 10 since the peak in the late 1970’s and currently stand at 230.0 automobile thefts per 100,000 people per year in 2011. New York enjoys one of the lowest theft rates in the country at 99.2. California, which has highly concentrated urban regions like NY, does not have a physical damage inspection program, and has one of the highest theft rates at 389.6.

The author also contends that the inspection process is unnecessary. Law enforcement and insurance carriers demonstrate otherwise: In 2012 the CARCO inspection database was accessed 9,382 times by law enforcement researching 148,709 vehicles and 835,844 times by all others including insurance companies SIU, claims and underwriting departments, researching 3,351,807 vehicles.

Another argument is that the physical inspections are unnecessary because other databases contain similar information. The facts show otherwise. Insurance companies routinely use other databases during the underwriting process, and yet CARCO finds hundreds of stolen cars per year that have been insured. CARCO examines each and every “EPA sticker” and routinely detects abnormalities that indicate a stolen car, and that cannot be detected any other way. Most of these thefts are due to car rings. A review of commercially available information in databases such as CARFAX or AutoCheck shows that they have a very poor detection rate for stolen cars. Part of the problem is that the stolen cars often have the VIN changed, and so when the CARFAX or AutoCheck report is run, it is actually run on the wrong VIN.

The clear answer is that the database, which contains over 20 million inspections and 50 million photographs is, in fact, very necessary and is a critical tool to help stop vehicle theft and fraud.

CARCO has not “moved on.” CARCO has been doing inspections since 1977, and background screening and HR services since 1978. Both are risk mitigation services and both are very important to us. CARCO pioneered centralized electronic inspection storage and reporting. Today, when it comes to technology and the modernization of Regulation 79, CARCO has worked closely with the New York State Department of Financial Services to make it more consumer friendly. CARCO has suggested a number of improvements, including increasing the current period from 5 to at least 7 days. When it comes to technology, earlier this year CARCO rolled out iPhone and android apps that enable the inspection process to be more efficient, and which eliminate the 3 day time lag for mailed in inspection forms. In addition, at no additional cost to the insurance companies, we are now including in all inspections a report provided by the United States Department of Justice National Motor Vehicle Title Information System (NMVTIS) that provides the most timely information of a vehicle’s “brand”; that is, its title, and whether or not is has been junked, salvaged or subject to an insurance company total loss situation.

The author extolls the virtues of technology but what he fails to realize is that with more and more insurance being transacted on-line without an agent, the probability of agents being cut out of the transaction increases as they are removed further and further from client contact. Conversely, the more enlightened agents recognize that the inspection process is a way to connect with their insureds and develop a relationship. With the new iPhone and Android apps the process of performing an inspection is easy and the transmission to CARCO is in real time. The smart brokers and agents see the inspections as a means to grow and solidify their client relations. That’s a primary driver why they support the Regulation.