Focus 1.8TDDi - Total Loss - Scrappage Charge

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Fri 1 Mar 2013 10:40
Focus 1.8TDDi - Total Loss - Scrappage Charge - Pootle

I wondered whether it's just me being cynical, but I wondered if anyone can shed any light on this?

Am currently dealing with my wife's car insurance claim. Due to the age of the car (2001), the insurer has deemed the car a 'total loss' because it sustained cosmetic damage in an accident (a fifty-fifty), which would be close to the value of the car to rectify. My wife wants to keep the car as the damage is cosmetic and the vehicle is otherwise OK and drives fine.

The insurer has valued the car at £1100 (a valuation I'm OK with, it's in the middle range of Glass' guide figures). They will deduct the excess (£150) from that amount, which is fair. They also want to take a 20% 'Scrappage charge' from the figure, leaving my wife with a sum total of £750.

When I spoke to the insurer, the Scrappage charge is due because my wife is choosing to hang onto the car and not scrap it. The insurer also said that this is because they don't make any money from scrapping the car, which they would have done otherwise.

My point is - surely that's irrelevant, as it's not their car to sell - it's my wife's car. As far as I'm concerned, my wife is paying her insurer to a) Insure her car and b) act in her best interests in doing so.

As an aside, I don't understand why a scrappage charge would be on a percentage scale either – surely a scrapyard wouldn't care much between vehicles? The cynic in me says it's just a good way for an insurer to make more money than a flat fee on more expensive cars.

Am I just being cynical? Don't insurers make enough money in premiums as it is?

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Fri 1 Mar 2013 20:38
Focus 1.8TDDi - Total Loss - Scrappage Charge - Brit_in_Germany

Pootle, you can look at it this way. The value of the car before the accident was £1100, after it, only £200, the difference being £900, which is what you would receive with no excess. Becuase of the excess, you only get a cheque for £750.

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Sat 2 Mar 2013 08:00
Focus 1.8TDDi - Total Loss - Scrappage Charge - rjr

"My point is - surely that's irrelevant, as it's not their car to sell - it's my wife's car"

If your car is written off and your insurance company reimburse you then the car belongs to the insurer not you. You may then buy the car back from the insurer, or they could sell it for scrap or sell it for salvage. They are offering to sell the car back to you for a fee and they are calling the fee "scrappage".

"Am I just being cynical?"

Yes

"Don't insurers make enough money in premiums as it is?"

Insurers pay out more in claims than they receive in premiums.


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Sat 2 Mar 2013 08:54
Focus 1.8TDDi - Total Loss - Scrappage Charge - bathtub tom
Insurers pay out more in claims than they receive in premiums.


Really, how do they survive?

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Sat 2 Mar 2013 10:39
Focus 1.8TDDi - Total Loss - Scrappage Charge - rjr

"how do they survive?"

Insurers sell add-ons to your policy that are more profitable (such as premium finance which is the interest on paying monthly) or subsidise the losses on motor insurance with profits from other types of insurance (like home insurance).

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Sat 2 Mar 2013 13:46
Focus 1.8TDDi - Total Loss - Scrappage Charge - dacouch

In an ideal world they make their money from investing the large amount of money they receive in premiums although in a recession the returns are lower which is one of the reasons premiums went up at the start of the recession (As they always do).

The add on's do add to their profitability but these are relatively new to the market.

Cross subsidising with lines that are more profitable eg Home Insurance is also a proft driver again which is fairly new to the scene.

During a "Hard Market" eg when a catastophe happens and / or a recession and / or a change in the law eg allowing No Win No Fee. The premiums raise to levels insurers can make returns eventually this attracts new entrants into the market which forces premiums down and creates a "Soft Market" where premium drop normally to unprofitable levels (Before investment returns) and the cycle goes on until the next recession etc

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Fri 8 Mar 2013 19:51
Focus 1.8TDDi - Total Loss - Scrappage Charge - Collos25

"how do they survive?"

Insurers sell add-ons to your policy that are more profitable (such as premium finance which is the interest on paying monthly) or subsidise the losses on motor insurance with profits from other types of insurance (like home insurance).

Admiral have just announced a very large profit on their car businness and so have Aviva no doubt the others run at a loss to annoy there shareholders.

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Sat 9 Mar 2013 16:58
Focus 1.8TDDi - Total Loss - Scrappage Charge - rjr

Admiral are the biggest motor insurer in the UK and have for years been the only major player to post a profit. Their performance is why most insurers persevere with UK motor insurance as the thoery is that if they can crack Admiral's formula then they too can make profits (although not everyone wants a cut-price service with pattern and secondhand parts used for repairs).

Aviva did make a large profit (before writing off a big chunk of their US investment) but they are a global business that does a lot more than just insurance let alone motor insurance. Their COR (combined operating ratio defined as claims+expenses/premium) for UK motor insurance was 97% so only a small profit actually came from this line of insurance.

The UK private motor insurance aggregate COR across the major insurers was 104.5% (meaning that the insurers lost 4.5p for every £1 of premium) in 2011. The 2012 has yet to be published but was not expected to improve.

Edited by rjr on 09/03/2013 at 16:59

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Sat 9 Mar 2013 18:29
Focus 1.8TDDi - Total Loss - Scrappage Charge - Collos25

The largest motor insurer in the UK according to BBC just produced record profits they all have good accountants to show what ever they like when it comes to paying tax on profits.No company in the world exept those owned by governments could survive if they never made any profit think about it.I know of no company that year on year makes a loss of 4.5% with no chance of making a profit or perhaps you believe the fairy stories that are told .

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Sat 9 Mar 2013 19:27
Focus 1.8TDDi - Total Loss - Scrappage Charge - dacouch

They make money on profitable business classes eg property (Home & Commercial), business insurance etc etc.

Motor Insurance is a loss leader for many insurers with the other classes of business cross subsidising.

The profits from investments of the premiums is one of the main profit areas

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Sat 9 Mar 2013 19:42
Focus 1.8TDDi - Total Loss - Scrappage Charge - RT

Motor Insurance is a loss leader for many insurers with the other classes of business cross subsidising.

It really is so kind of them to subsidise our car premiums with profits from other parts of their businesses !!

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Sun 10 Mar 2013 17:13
Focus 1.8TDDi - Total Loss - Scrappage Charge - rjr

If insurers make losses on private motor policies (even over several years) it does not mean that they are insolvent as the vast majority sell other forms of general insurance which is more profitable.

If you have some evidence that insurers are falsifying the figures then take it to companies house and the stock exchange - the penalties for doing so are severe.

Then again what would I know? I only used to be a Finance Director at an insurance company.

Edited by rjr on 10/03/2013 at 17:14

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Sat 2 Mar 2013 10:30
Focus 1.8TDDi - Total Loss - Scrappage Charge - martint123

I thought it was obvious.

They offer £1100 for settlement which you say is fair. They deduce the excess - fine.

However, you want to keep the car after being paid for the "write-off". It is probably worth a fair amount sold as salvage so they deduct what they could probably get for it. The fact your wife would be happy driving around int it shows it has a resale value.

Note alsoo that it will always be classed as a Cat C or D writeoff for an HPI check.

When an insurer pays out for a writeoff they own the remains of the vehicle.

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Sat 2 Mar 2013 14:27
Focus 1.8TDDi - Total Loss - Scrappage Charge - Pootle
Thanks all for explaining it clearly. I wasn't aware that once the insurer pays the claim, they own the salvage. Now I know that what they're proposing makes sense, I can finalise the claim.
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Thu 7 Mar 2013 08:08
Focus 1.8TDDi - Total Loss - Scrappage Charge - RT

The insurer only owns the vehicle once you accept their offer - up to that point you still own the vehicle.

Look at the finances another way - the valuation and excess are clear and many people would accept that - the extra "fee" is to "buy" the vehicle back from the insurer.

It would be unfair for you to receive valuation less excess and simply keep the vehicle free as you'd get more than someone receiving valuation less excess and letting the insurers scrap the vehicle.

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