It seems the cost of everything is on the rise these days. Factors for the rise are due to the cost of fuel (manufacturing and transpiration), slow economy and the need to increase revenue through sales, labor rates, etc. That trickles into the cost of insurance property repair. But, that is not the only factor contributing to the rising costs of insurance repairs. Cars and homes are becoming more expensive due to features and creature comforts. Over the past two decades the rise of the luxury car market and home upgrades are challenging claims departments to repair property damage while watching their loss costs. But is it solely up to the claims department to manage?

The challenge actually begins with the marketing and underwriting departments. Personal lines insurance is a tough business and carriers are fighting to be the lower-cost provider. Where underwriting departments often fail is to analyze the actual risk of particular cars down to the make/model/trim and only look at a vehicle class. Simple things like headlight replacement can dramatically impact the cost of a vehicle claim. Many cars share the same common chassis and drive train components. The luxury version of similar cars has many more upgrades that double or triple the cost of similar parts replacements. For example, the cost to replace a Lexus or Acura headlight assembly with bulb can be nearly triple the cost of the similar Toyota or Acura because of the Xenon bulbs, higher grade plastics, and the fact that the parts go to a luxury brand. Not all insurance carriers price the cars differently, however, as the standard and luxury brands are in a similar rate class.

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