The Texas Department of Insurance (TDI) has released the results of a data call from 10 auto insurers on appraisal use and outcomes, finding that it used in less than 0.02% of payable personal auto claims.

When appraisal was used, it was initiated by the claimants in 94% of the claims. Nearly half of the personal auto appraisal awards were for settlements ranging between $13,000 -$38,000 and resulted in $2,100 - $5,900 more than the insurer’s initial offer.

The call also included residential claims and appraisal data. TDI called for the submissions in June.

Many car insurance policies include an appraisal clause that policyholders can invoke to have a third-party appraisal done when they don’t agree with their carrier’s valuation of their vehicle or damages. Both the carrier and the policyholder hire an independent appraiser and if the appraisers can’t agree, an umpire is selected to make the final decision.

“Appraisal has been a notable topic of public policy discussion in recent years, including as the subject of multiple bills during the 88th Legislative regular session in 2023 and invited testimony before the House Insurance Committee in September 2022,” wrote TDI in its report released on Dec. 10.

“The Texas Department of Insurance is collecting this information because although appraisal is widely allowed in policy forms, insurers do not routinely collect and report appraisal data. Accordingly, there is very little publicly available data to help understand how and when appraisal is used and what impact it has.”

Type of data requested TDI asked for:

• • “Total appraisal data for each period. The request included questions about claim totals, appraisals demanded and completed, and appraisals preceded or followed by lawsuits.
  • “Claim-level data for each of the completed appraisals. The request included questions about the background of claims, the amount initially offered, which party demanded appraisal, whether an umpire was involved, how long appraisal took, the amount awarded, and the insurer’s appraisal expense (including paying its appraiser and a portion of any umpire fees).”
  • Questions asked of auto insurers can be found in the results document beginning on page 28.

Data provided by 12 insurer groups represents about 83% of the personal auto market in Texas based on TDI’s 2023 Market Conditions Annual Report.

TDI said the results don’t include data from one of the insurer groups subject to the data call. That group only reported a limited set of appraisals and didn’t provide most of the requested information for those appraisals, TDI said. The group wasn’t named.

Appraisals with missing data, unspecified award amounts, and award amounts less than $0 were excluded from some of the analyses, TDI said.

Over half of the personal auto appraisals were completed within one month after appraisals were demanded. More than 90% were completed within four months.

Seven percent of personal auto appraisals used an umpire.

Insurer expenses averaged about $570 for personal auto appraisals, and only one appraisal was preceded by a lawsuit. Lawsuits were filed after 13 of the appraisals were completed.

The Texas Office of Public Insurance Council (OPIC) recommended the right to appraisal on insurance claims be a mandatory part of policies in 2023.

OPIC noted in its report to the legislature that it is “increasingly concerned with restrictions on appraisal in policy forms filed by top insurers.”

In 2023, consumer advocacy group Texas Watch analyzed 1,246 auto insurance claims settled through independent appraisers. They found that, across all auto insurance claims, the appraisal award was an average 40% higher than the insurance offer.

Earlier this year, Progressive and Home State County Mutual filed policy change requests with TDI to remove the right to appraisal on a repair procedure dispute from their policies, according to Robert McDorman, Auto Body Association of Texas board member and Auto Claim Specialists general manager.

The Texas legislature will reconsider a mandatory appraisal bill during the upcoming 2025 session that nearly passed the last session in 2023.

Images

Featured stock image credit: BartCo

Charts courtesy of TDI’s “Appraisal Experience Data Call Report”